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The Monetary Authority of Singapore (MAS) has approved fintech startup BondEvalue to test blockchain-based bond trading platform in its Sandbox Express.
Sandbox Express provides firms with a faster option to test certain innovative financial products and services in the market. According to the official website, the MAS has approved just one more firm, Synoption, in addition to BondEvalue.
With bonds currently being mostly traded over-the-counter, bond prices are opaque and the process is inefficient. BondEvalue is seeking to address these issues by leveraging blockchain technology.
The company will be trialing its blockchain-based bond exchange, which will allow the electronic trading of bonds similar to stocks. The bond exchange is built on Hyperledger Sawtooth – a modular platform for building, deploying and running distributed ledgers.
In its press release, BondEvalue said that the platform will allow reducing the minimum investment amount of bonds to $1,000 via BondbloX – a fraction of a conventional $200,000 bond wherein each BondbloX has a denomination of $1,000. The platform will connect to banks, wealth managers and robo-advisors across the world, allowing their customers (limited to accredited investors in Singapore) to trade BondbloX.
“Today only about 50,000 people in Asia are able to afford wholesale bonds, due to the US$200,000 minimum investment. BondBloX will grow this number to over 25 million in the next 3-5 years,” said Rahul Banerjee, founder of BondEvalue. “The bond market should not be restricted to just the affluent but rather be accessible to all, like equities.”
Electronic bond trading will help improve the transparency of prices and facilitate instant trade settlement instead of the current two-day trade settlement cycle.
“BondEvalue will be able to provide greater financial inclusion through enhanced transparency, security and efficiency that Hyperledger Sawtooth's permissioned blockchain provides. It is a great example of how permissioned blockchain can disrupt traditional markets and offer new, interesting business models and opportunities,” said Brian Behlendorf, Executive Director, Hyperledger.
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