Local governments in the United States could save billions of dollars by using a blockchain-based system to issue bonds. SmartLedger Blockchain Solutions Inc. this week published a proposal for its “Strategic Blockchain Infrastructure Matrix” (SBIM) that would introduce massive cost savings and efficiency gains to the municipal bond market, freeing up valuable taxpayer funds for other vital projects like education, health, and public infrastructure.
There is currently $4 trillion worth of debt in the U.S. municipal bond market. However, a percentage of this money, vital for public use, is wasted on inefficiencies in the legacy systems used for issuing and administering the process. The results of this, SmartLedger says, are higher taxes, delayed infrastructure, and limited opportunities for everyday investors to become involved.
Using the SBIM instead would make the municipal bond market more transparent and efficient, compliant by design. It would also introduce more liquidity with narrower spreads and allow fractional ownership, which would mean even small investors could invest directly in their local communities. Blockchain inherently provides a secure and permanent record of transactions that are public and auditable.
Benefits would flow to taxpayers, those who control and manage public funds, service providers, and investors alike, SmartLedger says. SBIM is a “citizen first” model that strengthens trust and aligns municipal finance more closely with its purported democratic values. It would also provide a greater advantage to smaller municipalities, as those with fewer resources face a greater burden from existing fixed costs.
“This is not cryptocurrency speculation or unregulated tokens. It is the modernization of regulated securities on a public ledger designed for safety, compliance, and trust.”
The essence of choosing the right blockchain for the task
The proposed system uses the BSV blockchain as its base, which is something SmartLedger says is essential. BSV is scalable, fast, and affordable, thanks to its per-transaction fees of a tiny fraction of a U.S. cent each. It also supports tokenization and programmable smart contracts (from sCrypt) that could automate compliance and manage a bond’s lifecycle, handling things like coupons, disclosures, redemptions, and even non-financial aspects like ESG milestones.
SmartLedger’s research also ranks BSV against other potential blockchain networks, including Hyperledger Fabric, R3 Corda, Avalanche, Polygon, Cardano, and Ethereum. All have their strengths and weaknesses, but BSV has the highest scores for “foundational viability” and “organizational alignment.”
Savings would come via less money spent on legal and advisory fees, paperwork, fewer errors, and faster settlements. SmartLedger says that under legacy systems, issuance costs can average 1.02% of the principal—any entity issuing over $100 billion annually is paying over $1 billion of that just for the process. Secondary market spreads (53 bps on average, and over 200 bps for retail) introduce a further illiquidity premium through fragmented markets and investor expectations. Its blockchain-based solution would have T+0 (i.e., instant or same-day) atomic settlement, and significantly reduce spreads (its estimate is a 150 bps reduction).
Ideally, this would lead to lower taxes, but savings could also be spent on things like upgraded technology and medical equipment, repairs, teacher salaries, better public facilities, and quality infrastructure like roads, bridges, and transit.
Phased introduction and benefits for early movers
SmartLedger has identified other early adopter opportunities for any municipality that decides to implement the SBIM. There’s an emerging appetite among institutional investors for digital assets, many of which can be risky. Another technology gaining a lot of attention lately is the tokenization of real-world assets (RWAs), which includes both physical assets and other existing financial instruments. The financial and asset-management world is generally keen to embrace any new technologies that increase liquidity and/or efficiency, or reduce friction and costs. Therefore, moving toward a secure digital system is seen as a natural and inevitable progression. The first entities to embrace such a system would gain extra attention from their decision.
A system like the SBIM should be introduced in three phases rather than all at once, the company says. The first should be a pilot program to establish the legal/regulatory frameworks and engage with regulators. The second would involve onboarding any necessary intermediaries like underwriters, broker-dealers, municipal advisors, custodians, and developers. Phase 2 would also extend the plan to more complex structures like long-term revenue bonds and develop secondary-market liquidity. The final phase would be full integration with traditional financial systems, and standardizing processes and data formats for on-chain reporting, making them machine-readable and embedding certain data in the smart contracts.
“The technology to build this future exists today,” SmartLedger says, adding that it is prepared to launch pilot issuances with municipalities looking to pioneer usage of these new technologies as early as 2026, thereby creating the foundation for a nationwide public finance utility and starting to gain from its benefits by the end of the decade.
“The mandate now is to collaborate, innovate, and build it together.”
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Source: https://coingeek.com/smarter-investing-and-savings-through-blockchain-bonds/
