| dc.description.abstract | Distributed ledger technology (DLT) and tokenization are emerging technologies with the potential to transform financial markets through digitization and programmability. Presenting assets as digital tokens on blockchain platforms, new pathways for improving trading, ownership transfer, and servicing become possible. This thesis explores the utilization of tokenization and DLT in bond markets and wholesale central bank digital currencies (CBDC).
The analysis is guided by the research question: How can tokenization and DLT-based wholesale central bank digital currency transform traditional bond markets and their value chain? Findings from existing literature and expert interviews show that bonds exhibit frictions, including manual processing and delayed settlement. DLT could reduce these inefficiencies by enabling atomic delivery versus payment settlement, automating manual processes, streamlining ownership tracking and asset servicing through smart contracts.
Realizing these opportunities requires modernizing not only the structure of the asset but also the cash leg of transactions. A potential DLT-based wholesale CBDC represents central bank-issued money natively compatible with tokenized asset settlements. With programmable tokens and wholesale CBDC, instant clearing, and atomic settlement become achievable on integrated platforms.
Key findings indicate potential efficiency opportunities in bond markets. However, quantifying forecasted cost reductions involves uncertainty. Consultancy estimates range from 24% to 43% savings, but realizing such gains requires overcoming complex barriers, including interoperability, transition costs, system integration, legal framework, and altering established intermediary roles.
For market participants, trusting unfamiliar DLT codes poses a barrier that could be reduced if central banks include the technology in CBDC solutions, given their trustworthiness in Western economies. This will likely involve financial regulation to ensure accountability, security, and stability. While the technology offers theoretical improvements, translating into real-world disruption requires overcoming integration hurdles. This thesis provides insights into the technological promises and adoption realities that must be addressed before DLT can transform bond markets. | en_US |
