JPMorganChase facilitated the first U.S. blockchain-based live municipal digital bond issuance.

The inaugural transaction helped the City of Quincy, Massachusetts, sell approximately $10 million in bonds, with the city receiving the funds into a blockchain-based deposit account. The blockchain-based application enabled the City of Quincy to see the proceeds from the sale near-real time.

This bond sale marked the launch of the firm’s Digital Debt Service on Onyx Digital Assets, J.P. Morgan’s private and permissioned blockchain-based platform. This is the first issuance of its kind where the municipal debt is purchased, settled, held and managed on a blockchain.

Journey to launch

Digital bonds that are issued, recorded and transferred using distributed ledger technologies (DLT) on blockchain represent a potential significant leap forward in the financial market ecosystem. The idea for the firm’s DLT offering started with internal product and technology teams collaborating to deconstruct the bond lifecycle and devised a client-centric blockchain solution.

Next, the teams engaged some of the bank’s market clients and partnered across different internal business groups to create a solution. Marked by regular sprints and iterative enhancements, development of the Digital Debt Service on the firm’s Onyx Digital Assets platform was underway.

The Digital Debt Service uses blockchain-based deposit and securities accounts along with smart contracts to facilitate post-execution trade management, delivery-versus-payment (DvP) settlement, coupon payments and redemptions. It offers a private permissioned, on-chain bond lifecycle management solution for issuers, investors, broker-dealers and custodians.

DLT advantages

The securities are integrated on the Onyx Digital Assets blockchain ledger throughout their lifecycle, including for primary issuance, primary and secondary trade settlement, and asset servicing (coupon payments and redemption). This method offers several potential advantages over the traditional market for debt securities, including:

  • Comprehensive coverage of the bond lifecycle in a single accessible platform
  • Reduced settlement risk through simultaneous asset and cash exchange
  • Decreased reliance on intermediaries and third parties
  • Reduce the operational costs of managing and servicing funds 
  • Enhanced transparency via real-time visibility into a shared ledger
  • Potential for programmable settlement, including T+0 and precise settlement time specification

“The launch of the Digital Debt Service and subsequent pricing of the City of Quincy marked a huge collaborative and team effort from over 100 internal colleagues,” said Emma Lovett, Executive Director, Markets Distributed Ledger Technology  Credit Lead. “We are excited that this landmark new issuance will start to pave the way for evolving distributed ledger technology infrastructure within the Fixed Income markets.”