Central bank money on blockchain? Italian trial paves the way with a $27.2 million digital bond.
An Italian government bank, Cassa Depositi e Prestiti (CDP), just issued a digital bond worth $27.2 million. They partnered with the massive investment bank Intesa Sanpaolo to complete this transaction on Polygon, a system built on top of the Ethereum blockchain.
This was actually a test run organized by the European Central Bank (ECB). They’re looking for better ways to use central bank money to settle large transactions on blockchains, according to a statement by Intesa Sanpaolo on July 18th.
This transaction marked a historic moment following Italy’s implementation of its FinTech decree law, which regulates the issuance and circulation of digital financial instruments.
Cassa Depositi issued a $27.2 million (25 million euro) bond with a four-month maturity, ending on November 18, 2024, offering a fixed annual coupon rate of 3.63%. Intesa Sanpaolo was the sole institutional investor in this pilot.
The cash flow settlement was executed on the same day using the Bank of Italy’s “TIPS Hash Link” tool, facilitating interoperability between blockchains and traditional payment systems.
“This transaction highlights the capability of public blockchains to enhance transaction speed and security for financial institutions,” Niccolò Bardoscia, head of digital assets trading and investments at Intesa Sanpaolo, stated in a LinkedIn post on July 18.
BlackRock’s CEO Larry Fink has also endorsed tokenization, predicting that every stock and bond will eventually utilize blockchain technology.
However, not everyone shares Fink’s optimism. Financial law professor Hilary Allen recently told the United States Congress that public blockchains are too “fragile” for tokenizing trillions of dollars in real-world assets, citing their inefficiency and inability to handle large transaction volumes.
Despite differing opinions, Boston Consulting Group projects the tokenized asset market could grow to $16 trillion by 2030, while McKinsey offers a more conservative estimate of $2 trillion within the same period.
Currently, over $89 billion in tokenized assets are tracked on blockchain platforms, according to data from 21Shares on Dune Analytics. Polygon ranks fourth among blockchains by tokenized value, with $40.3 million, following Ethereum, Stellar, and Mantle.
