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(Updated September 2022)

Understanding DLT and blockchain in bond markets

DLT and blockchain represent an exciting new frontier in the evolution of fixed income securities issuance and trading. To raise market awareness and clarify some of the fundamental questions, ICMA and its DLT Bonds Working Group have developed a first set of Frequently Asked Questions (“FAQs”).

These FAQs are designed to serve as an entry point for non-experts to gain a basic understanding of DLT bonds and their impact on capital markets. The DLT and blockchain in bond markets FAQs will be updated regularly. See further background here.
1. What is distributed ledger technology? What is blockchain?
2. What are virtual assets, crypto assets and (native) digital assets?
3. What is a Central Bank Digital Currency (CBDC)?
4. What are so-called stablecoins?
5. What are DLT bonds?
6. What is the difference between DLT bonds and traditional bonds, and how they are held?
7. How does DLT bond documentation generally differ from traditional legal bond documentation? [6]
8. What is a (digital) token?
9. Are DLT bonds always on a DLT network or blockchain? Are there access restrictions?
10. Can DLT bonds reduce settlement risk?
11. How might DLT bonds change the issuance and lifecycle process?
12. How are payments made in relation to DLT bonds?
13. What is the Common Domain Model (CDM) for repo and bonds, and how does this fit in with DLT bonds?
14. What is ICMA's Common Data Dictionary initiative for primary bond markets, and how does it support DLT bonds?
15.  Appendix 1
16.  Appendix 2
 

ICMA is grateful to Dr. Scott Farrell and Philip Harvey at King & Wood Mallesons, and Rehan Ahmed and Sriram Chakravarthi at SGX Group/Marketnode Pte. Ltd. for their technical guidance. ICMA would furthermore like to thank the members of its DLT Bonds Working Group for their feedback, drafting suggestions and commentary on the FAQs. These FAQs have been co-authored and edited by Gabriel Callsen, ICMA.

The FAQs on DLT and blockchain in bond markets are provided for information purposes only and should not be relied upon as legal, financial, or other professional advice. While the information contained herein is taken from sources believed to be reliable, ICMA does not represent or warrant that it is accurate or complete and neither ICMA nor its employees shall have any liability arising from or relating to the use of this publication or its contents, including any information on any third party website which may be referred to in this document.

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