Tokenized Bonds: How World Bank and EIB Issue Bonds on Blockchain

Tokenized bonds bring faster settlement and automated payments to fixed-income markets — the World Bank proved the model in 2018 with its A$110 million blockchain bond.

Introduction

A tokenized bond is a traditional debt instrument — a contract in which an issuer borrows capital, pays periodic interest (the coupon), and returns the principal at maturity — whose ownership record and lifecycle are represented on a blockchain instead of a centralized registry. Rather than replacing the underlying economics, tokenization moves the technical layer to a distributed ledger, enabling automated coupon payments via smart contracts, near-instant settlement, and direct digital transfer of ownership between parties. The global fixed-income market was valued at approximately $140.7 trillion in 2023, making it one of the largest capital markets in the world.

Institutional adoption of tokenized bonds began in earnest in 2018, when the World Bank issued bond-i — the first bond to be created, allocated, transferred, and managed entirely using distributed ledger technology — raising A$110 million via Commonwealth Bank of Australia. The European Investment Bank (EIB) followed in April 2021 with the first digitally native bond on a public blockchain, and corporate issuers such as Siemens entered the market in 2023 with fully paperless issuances on public networks. Regulatory frameworks have since developed to support this growth, including the EU's DLT Pilot Regime, which entered application on 23 March 2023.

This article explains how tokenized bonds work, how the issuance process operates step by step, what landmark deals have proven the model at institutional scale, and what risks and regulatory frameworks apply across major jurisdictions.

What Are Tokenized Bonds and How Do They Differ from Traditional Bonds?

From Paper Registry to Blockchain Ledger

A traditional bond is a debt instrument where an issuer borrows capital from investors, pays periodic interest (the coupon), and returns the principal at maturity. Ownership is recorded in a centralized registry and managed through layers of custodians and central securities depositories (CSDs). Any transfer requires coordinated updates across multiple systems, creating delays and administrative costs.

A tokenized bond keeps the same cash flows — coupon payments, principal repayment, maturity date — but moves the technical layer to a shared blockchain ledger. Ownership is represented by tokens held in a digital wallet, and a transfer becomes a single on-chain transaction. Compliance rules, such as investor eligibility checks, are enforced programmatically at the smart-contract level rather than by manual back-office processes.

Three Bond Token Models

Bond tokenization takes three distinct forms. The first is a native digital bond: the issuer creates it directly on-chain, minting tokens that represent the bond from the outset, with no paper equivalent. The second is a tokenized wrapper: a traditional bond is issued and held by a custodian off-chain, while a digital twin is minted on a blockchain to represent a claim on that underlying asset. The third is a structured credit fund token: a managed credit portfolio issues tokens that give holders proportional exposure to a pool of fixed-income assets.

Traditional Bond vs. Tokenized Bond

The table below compares the two instrument types across seven operational dimensions.

Data current as of April 2026.

How Does the Tokenized Bond Issuance Process Work Step by Step?

From Legal Structuring to On-Chain Minting

The tokenized bond issuance process begins with legal and financial structuring. The issuer defines the bond's principal amount, coupon rate, maturity date, and transfer restrictions. These terms are then encoded directly into a smart contract — self-executing code on a blockchain that enforces the rules without manual intervention. The issuer also selects the appropriate jurisdiction, since legal recognition of digital securities varies across markets.

Once the smart contract is deployed, bond tokens are minted on the chosen blockchain. For Ethereum-based bonds, the ERC-20 token standard — a common protocol for creating fungible digital assets — is frequently used. Each token represents a defined unit of the bond, and the total token supply corresponds to the total issuance size. Before investors can receive tokens, they complete KYC (Know Your Customer) and AML (Anti-Money Laundering) checks, and their wallets are whitelisted in the smart contract to restrict transfers to eligible parties only.

Settlement, Coupon Automation, and Redemption

The EIB's April 2021 issuance illustrates how primary market distribution and settlement work in practice. Investors purchased the €100 million two-year bond using traditional fiat currency, while the lead managers — Goldman Sachs, Santander, and Société Générale — settled the underwriting payment to the EIB using a wholesale central bank digital currency (CBDC) provided by Banque de France. This CBDC settlement enabled atomic settlement — the simultaneous, instantaneous exchange of cash and bond tokens with no gap between payment and delivery. The principal was repaid in commercial fiat at maturity.

After issuance, smart contracts automate the bond's ongoing lifecycle. Coupon payments are calculated and distributed to token holders on scheduled dates, without a paying agent performing manual calculations. At maturity, the smart contract triggers principal repayment and burns (cancels) the outstanding tokens, closing the bond's lifecycle entirely on-chain. The underlying economics remain unchanged throughout — the issuer still borrows, pays periodic interest, and returns principal — but the technical layer shifts from fragmented intermediary systems to a single shared ledger.

What Were the Landmark Tokenized Bond Issuances by the World Bank and EIB?

World Bank Bond-i: The First Blockchain Bond

In August 2018, the World Bank mandated Commonwealth Bank of Australia (CBA) as sole arranger for bond-i — Blockchain Operated New Debt Instrument — the world's first bond to be created, allocated, transferred, and managed entirely using distributed ledger technology. The two-year bond raised A$110 million on a private Ethereum blockchain platform operated jointly by the World Bank in Washington and CBA in Sydney. In August 2019, the World Bank issued a second tranche of A$50 million, managed by CBA, RBC, and TD, which expanded the investor base and extended the bond's secondary market trading capability on-chain.

EIB's Public Blockchain Issuances

On 27 April 2021, the European Investment Bank (EIB) issued its first digital bond — a €100 million two-year note on the public Ethereum blockchain — in collaboration with Goldman Sachs, Santander, and Société Générale as joint lead managers. This was the first multi-dealer-led primary issuance of digitally native bond tokens on a public blockchain. Settlement of issue monies from the underwriters to the EIB was represented on-chain in the form of a wholesale CBDC (central bank digital currency) provided by Banque de France, with Société Générale–FORGE serving as registrar and platform manager. A process that had previously taken five business days settled within one day.

On 19 November 2024, the EIB issued a further €100 million three-year digital bond as part of the ECB Eurosystem's exploratory work on new technologies for wholesale central bank money settlement. This Luxembourg law–governed issuance used the HSBC Orion tokenization platform, operated by HSBC Continental Europe (Luxembourg).

Landmark Tokenized Bond Milestones

Data current as of April 2026.

What Are the Main Benefits of Tokenizing Bonds for Issuers and Investors?

Benefits for Issuers

Smart contracts reduce reliance on intermediaries — paying agents, custodians, and manual reconciliation teams — which lowers issuance costs and back-office burden. Programmable compliance allows transfer restrictions and eligibility rules to be enforced automatically at the contract level, reducing regulatory reporting overhead. For green and ESG-linked bonds, issuers can encode the intended use of proceeds directly into the bond's terms, providing verifiable, on-chain proof of fund allocation.

Faster settlement also reduces balance-sheet exposure. In a traditional T+2 system, the two-day gap between trade execution and settlement leaves both parties exposed to default risk. Atomic settlement — where cash and bond tokens transfer simultaneously in a single transaction — eliminates that window entirely. A 2026 ECB analysis found that tokenized bonds reduce borrowing costs and improve market liquidity relative to matched conventional bonds.

Benefits for Investors

Fractional ownership lowers the minimum ticket size for bond investment. Traditional bonds often require minimum purchases of $100,000 or more, excluding smaller institutional and retail participants. Tokenization allows a bond to be divided into smaller denominations, widening the investor base significantly.

Near-instant settlement reduces counterparty risk and frees up capital more quickly between trades. Programmable coupon payments — distributed automatically by smart contract on scheduled dates — increase payment predictability and remove dependency on intermediary systems. DLT-based fixed-income issuance globally reached €4.8 billion in 2025, a 48% increase from €3.25 billion in 2024, reflecting accelerating institutional adoption of these advantages.

What Risks and Challenges Should You Consider with Tokenized Bonds?

Technology and Operational Risks

Smart contract risk is the most distinctive technology hazard in tokenized bond markets. A coding error in a deployed contract can trigger incorrect coupon distributions, lock funds, or enable unauthorized transfers — and unlike centralized systems, on-chain code errors are difficult to reverse. Oracle failures add a related risk: when a smart contract needs external data — such as a reference interest rate for a floating-rate bond — it relies on an oracle (a data feed provider) to supply that information. Manipulated or delayed oracle data can cause unintended contract execution and direct financial loss.

Operational risks span custody and interoperability. Private key custody — securing the cryptographic keys that control wallet access — is the operational equivalent of safeguarding a bearer instrument; loss or theft of keys means loss of the asset. Different tokenized bond platforms currently run on incompatible technical standards, meaning a bond issued on one network cannot freely transfer to another without additional bridging infrastructure. The World Bank has explicitly flagged both smart contract vulnerabilities and blockchain interoperability gaps as active risk categories for digital tokenized bonds.

Legal, Regulatory, and Market Risks

Legal frameworks for tokenized bonds vary significantly across jurisdictions, and cross-border recognition of DLT-based ownership transfers is not yet uniform. A bond token recognized as a valid security in Switzerland may face legal uncertainty in another market, creating compliance complexity for issuers and investors operating across borders. Uncertainty around future legislative changes adds further instability, since a regulatory shift in a key jurisdiction can affect market access and asset valuation.

Secondary market liquidity remains thin relative to conventional bond markets. Most tokenized bond transactions to date have been primary market issuances, and dedicated secondary trading venues are still in early development. Thin secondary markets limit investors' ability to exit positions at fair prices, creating a liquidity premium that partially offsets issuance cost savings.

Tokenized Bond Risk Matrix

Data current as of April 2026.

How Do Corporate Issuers Use Blockchain for Bond Issuance?

Siemens: The Paperless Corporate Bond

In February 2023, Siemens AG issued Germany's first digital bond on a public blockchain under Germany's Electronic Securities Act (eWpG). The €60 million one-year bond was issued directly on the Polygon public mainnet, bypassing banks as intermediaries entirely. Siemens stated that the issuance made paper-based global certificates and central clearing unnecessary, and that the bond could be sold directly to investors without a bank acting as an intermediary.

The contrast with public-sector issuances is significant. Where the World Bank and EIB used bank-led syndication and CBDC settlement infrastructure, Siemens used a fully disintermediated model — no underwriting bank, no paper documentation, and no central clearing house. Settlement executed significantly faster than conventional bond issuance. Siemens repeated the approach in September 2024, issuing a further digital bond on blockchain under the same German legal framework.

Corporate Motivations and Asset Manager Adoption

Corporate issuers are drawn to tokenized bond structures for four main reasons: reduced issuance costs from removing intermediary layers, faster execution and settlement, access to a broader and more diverse investor base, and for ESG-linked instruments, verifiable on-chain tracking of fund allocation to qualifying projects.

Asset managers have entered the space from the demand side. BlackRock's BUIDL fund — the BlackRock USD Institutional Digital Liquidity Fund, launched on Ethereum in March 2024 via Securitize — held approximately $2.2 billion in tokenized short-term US Treasuries and related instruments as of February 2026, making it the largest tokenized money market fund globally at that time. By late 2025, the broader tokenized US Treasury market reached approximately $7 billion in total market capitalization, representing roughly 50x growth in under two years.

What Regulatory Frameworks Govern Tokenized Bond Issuance in Different Jurisdictions?

The European Union: DLT Pilot Regime and MiCA

The EU's primary framework for tokenized bond markets is Regulation (EU) 2022/858, known as the DLT Pilot Regime, which entered application on 23 March 2023. The regime allows DLT market infrastructure operators — trading systems and settlement systems — to receive temporary exemptions from select MiFID II requirements, enabling them to operate under regulatory supervision while testing blockchain-based bond trading and settlement. Under the regime, individual bond and money market instrument issuances on DLT platforms must remain below €1 billion per instrument.

ESMA published a formal review of the DLT Pilot Regime in June 2025, covering its operation from March 2023 through May 2025. The report found that uptake remained limited but that the regime had stimulated experimentation in DLT-based trading, settlement, and compliance. ESMA recommended recalibrating the current thresholds, which it assessed as restricting wider participation. Separately, the EU's Markets in Crypto-Assets Regulation (MiCA) covers crypto-assets but explicitly excludes financial instruments such as bond tokens, which remain governed by securities law frameworks including MiFID II and the DLT Pilot Regime.

Switzerland: DLT Act and SIX Digital Exchange

Switzerland's Federal Act on the Adaptation of Federal Legislation to Developments in Distributed Ledger Technology — the DLT Act — came into force on 1 August 2021 and created a new legal category of ledger-based rights (Registerwertrechte) under the Swiss Code of Obligations. This framework explicitly enables the issuance and transfer of securities as digital tokens, providing legal certainty without requiring parallel paper documentation. Since 2021, SIX Digital Exchange (SDX) — Switzerland's regulated DLT market infrastructure — has facilitated ten digital bond issuances totalling nearly CHF 1.4 billion as of early 2026.

Singapore and Other Jurisdictions

Singapore's Monetary Authority (MAS) launched Project Guardian in 2022 to explore institutional tokenized finance across bonds, funds, and settlement infrastructure. By November 2024, MAS had expanded Project Guardian with five new pilots, including a cross-border transaction that atomically settled a repo, a digital bond purchase, and a redemption across entities in Japan, Singapore, and Switzerland. Bond tokens that qualify as capital markets products under Singapore law are regulated as securities, not as digital payment tokens.

In the United Kingdom and the United States, tokenized securities regulation is still developing through sandbox programmes and case-by-case exemption approaches, with no comprehensive DLT-specific securities framework equivalent to the EU's Pilot Regime yet in place as of April 2026. Across all jurisdictions, bond tokens that represent debt securities are treated as financial instruments regulated under existing securities law, not as crypto-assets under consumer-oriented frameworks.

How Does Tokenized Bond Settlement Compare Across Major Platforms and Networks?

Platform Architecture and Settlement Mechanics

The choice of DLT platform directly determines how a tokenized bond settles, what cash instrument is used for payment, and which investors can access the security. Ethereum, as a public blockchain, offers the broadest investor reach and maximum transparency, but its open architecture requires issuers to manage investor whitelisting and transfer restrictions through smart contract logic. The EIB used public Ethereum for its April 2021 issuance, settling with Banque de France wholesale CBDC — a digital form of central bank money issued to financial institutions — delivered via Société Générale–FORGE.

Polygon, a Layer 2 network that processes transactions off the Ethereum main chain before settling them back to it, offered Siemens lower transaction costs and faster finality for its February 2023 issuance. Euroclear's D-FMI (Digital Financial Market Infrastructure) platform, built on private DLT, integrates with Euroclear's conventional settlement system, enabling delivery-versus-payment settlement within hours of trade execution while remaining compliant with the Central Securities Depositories Regulation (CSDR). The World Bank was the first issuer on the Euroclear D-FMI platform, raising EUR 100 million in a three-year Digitally Native Note in October 2023.

SIX Digital Exchange and the Swiss CBDC Model

SIX Digital Exchange (SDX) operates Switzerland's regulated DLT market infrastructure and enables atomic settlement of digital bonds against tokenized Swiss francs and euros — with the Swiss franc instrument backed by Swiss National Bank wholesale CBDC issued under Project Helvetia. In May 2024, the World Bank partnered with the Swiss National Bank and SDX to issue a digital bond settled in tokenized Swiss central bank money, connecting SDX to conventional custodians via SIX SIS so that investors could hold the bond through traditional custodian accounts. The SNB's wholesale CBDC pilot on SDX has been extended through at least June 2027.

DLT Settlement Platform Comparison

Data current as of April 2026.

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