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Ethereum-focused tech and VC firm ConsenSys has acquired U.S.-based broker-dealer Heritage Financial Systems as part of efforts to disrupt the municipal bond market, Bloomberg reported. Terms of the agreement haven’t been disclosed.
ConsenSys said that tokenizing municipal bonds on its ethereum-based operating system, Codefi, will allow governments to raise funds more efficiently and gain local investors. Heritage has been acquired by ConsenSys Digital Securities LLC.
The inception of municipal (muni) bonds could be traced back to the 19th century. Over the years, the market has grown tremendously in size, reaching almost $4 trillion in the third quarter of 2018.
However, despite this remarkable growth, the market is plagued with a number of challenges including late and outdated financial filings, technological roadblocks and human errors, causing officials to forget making timely bond payments.
ConsenSys believes that distributed ledger technology can help transform the muni market by automating bond payments for issuers and keeping track of who owns the debt. The technology can also enable issuers to sell securities in smaller denominations (mini bonds).
“It’s a great use case of the technology,” said Emma Channing, who will coordinate the brokerage effort through Heritage Financial Systems. “There’s a strong desire and demand for more local engagement and more democratization of these types of muni offerings.”
She said that the acquisition of Heritage will give the company both advisory and broker-dealer capabilities.
Meanwhile, ConsenSys has laid off 14% of its workforce amid its efforts to separate its software development business (ConsenSys) from its venture activities (ConsenSys Investments). In an online post, the firm said:
“This restructuring is a critical step toward enabling ConsenSys to continue to drive innovation, better serve its customers and the broader ecosystem, and keep pace with accelerating market growth.”
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