Italy’s state-owned Cassa Depositi e Prestiti (CDP) has successfully completed the issuance of a $27.2 million digital bond, marking a significant step towards integrating blockchain technology into traditional finance. The trial, conducted in collaboration with investment giant Intesa Sanpaolo, utilized the Ethereum layer-2 scaling solution Polygon.
This initiative aligns with the European Central Bank’s (ECB) exploration of blockchain‘s potential for streamlining central bank money settlement in wholesale transactions. The move comes shortly after Italy introduced its FinTech decree law, which regulates the issuance and trading of digital financial instruments.
The four-month bond, maturing in November 2024, offers a fixed annual coupon of 3.63%. Notably, Intesa Sanpaolo acted as the sole investor in this trial. The cash flow was settled on the same day using the Bank of Italy’s “TIPS Hash Link” tool, demonstrating interoperability between blockchain and traditional payment systems.
Proponents of blockchain technology, like Intesa Sanpaolo’s head of digital assets trading, Niccolò Bardoscia, believe it can revolutionize financial transactions by enhancing speed and security. He predicts this technology will impact not just bonds, but all asset classes in the coming years. This view is echoed by BlackRock CEO Larry Fink, who envisions a future where all stocks and bonds operate on blockchain rails.
However, skepticism exists. Financial law expert Hilary Allen expressed concerns to the US Congress about the suitability of public blockchains for handling trillions of dollars in real-world assets, citing their inefficiency and limited transaction capacity.
Despite these concerns, the future of tokenized assets appears promising. Consulting firms Boston Consulting Group and McKinsey estimate the market could reach $16 trillion and $2 trillion by 2030, respectively. Currently, over $89 billion in tokenized assets reside on blockchains, with Polygon ranking fourth in terms of value.
This Italian trial paves the way for further exploration of blockchain’s viability in the financial sector. As technology matures and regulatory frameworks adapt, we may witness a significant shift towards digitalized financial instruments.
