Ethereum’s powerhouse ConsenSys has acquired a SEC registered advisor and broker with the aim of tokenizing state and local government fundraising through bonds.
The acquisition of Heritage Financial Systems will allow ConsenSys to enter the $3.8 trillion state and local bonds market with the aim of tokenizing bond offerings for increased efficiency and market access.
“There’s a strong desire and demand for more local engagement and more democratization of these types of muni offerings,” Emma Channing, Registered Representative at ConsenSys, said while referring to municipal bonds.
Little detail is revealed, either regarding the acquisition or how they plan to tokenize these bonds, but in December the City of Berkeley in California asked for proposals that mention blockchain as a criteria. They said:
“The City of Berkeley is soliciting written proposals from qualified firms or individuals able to provide full services for the establishment and execution of a pilot microbond financing program for future City projects such that services will entail development through implementation of an actual project(s) that is focused on encouraging local participation and leverages emerging technologies.”
Berkeley has been examining tokenized bonds since 2017, with the City Council giving the green-light in 2018.
They have not yet launched any such bond, but the new proposal suggests they might be moving forward as it requires bonds are administered “on an ongoing basis utilizing blockchain or another digital ledger technology.”
The aim might be to diversify fundraising methods after Trump threatened to cut government funding of the liberal stronghold, but a side effect might be greater accessibility as the bond market is very alien to millennials.
The digital generation is used to quick and one click services with open stats and data in easily accessible online exchanges that do not require any paperwork back and forth or weeks of waiting.
A tokenized bond would be like any other token tradable on Coinbase or any other crypto exchange with it just another asset that otherwise risks being left behind because digitization is disrupting investment.
ConsenSys thus clearly sees an opportunity to digitize this very old market where fax machines are still the newest invention, but how far they’ll be able to go remains to be seen.