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What it is
Tokenized bonds are bonds that are bought and sold in the form of digital tokens. These tokens are traded through a blockchain, which is a shared ledger that holds a digital record of transactions.
As an investment vehicle, tokenized bonds work just like regular bonds. Buying them means you’re lending money to the issuer in exchange for interest payments.
What makes the tokenized version different is the technology that powers the trading and management of bonds.
What it means for you
Tokenized bonds are relatively new, and you may have seen such products pop up on local and global investing platforms. Like regular bonds, these assets are issued by corporations or governments.
By using blockchain technology, issuers aim to make trading more efficient and accessible. This approach is seen as a way to “cut out the middleman” by automating processes that are usually done by third party agents like banks and brokers.
Tokenization is also intended to make bonds more affordable. That’s because tokenized bonds can be offered at lower minimum investment amounts than regular bonds.
If you want to invest in tokenized bonds, learn the risks you may face before diving in. It’s important to understand how these bonds work and the technology behind them to know if they’re a good option for you.
