This is a guest opinion post from Professor Michael Sung, Co-Director of the Fudan Fanhai Fintech Research Center and Charles Chang, Associate Dean of Academics, Fanhai International School of Finance, Fudan University, China.
There are a number of accelerating trends that will explosively converge in the upcoming year: 1) the advent of digital bonds as a new innovation for capital markets, 2) the eventual regulation of these type of digital assets in China, 3) the global scaling of the green bond market, 4) China’s emphasis and leadership in green finance and sustainable development.
The benefits of digitalizing a bond instrument are numerous, the first and foremost being the ability to unlock liquidity by providing access to global capital and increasing connectivity to alternative investor classes beyond traditional institutions. Digitalization can allow the fractionalization of a bond into smaller minimum investment sizes so that even retail investors can participate. By digitalizing the bond, it is possible to leverage blockchain technology to streamline the coordination processes for issuers, underwriters, investors, and ecosystem participants across the primary issuance and asset servicing.
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