The municipality of Quincy, situated in close proximity to Boston, Massachusetts, has recently employed blockchain technology to issue a $10 million municipal bond. Acting as the exclusive underwriter for the tax-exempt seven-year bonds was JP Morgan, with the issuance process facilitated through the Onyx private permissioned blockchain.

This strategic move underscores JP Morgan’s ongoing exploration of distributed ledger technology (DLT) for debt issuance. As far back as 2018, the financial institution leveraged blockchain technology to issue a Yankee certificate of deposit for the National Bank of Canada.

The issuance of the Quincy bond also marks the debut of a new application within the Onyx Digital Assets ecosystem, known as the JP Morgan Digital Debt Service. Additionally, Onyx provides a range of tokenization solutions, including intraday repo and the Tokenized Collateral Network, alongside payment solutions like JPM Coin Systems and Liink for interbank data sharing.

Rick Coscia, Quincy’s strategic asset manager, voiced optimism regarding the potential advantages of blockchain technology, foreseeing reduced issuance costs, enhanced liquidity, and expedited settlement times.

Looking ahead, the question arises as to whether community members can engage in municipal bond purchases through DLT. The potential of tokenization to bolster liquidity remains a subject of debate in the blockchain industry. While automation has the capacity to lower issuance expenses and enable the issuance of smaller denomination bonds, the lack of integration with existing networks presents a hurdle. Nevertheless, progress is anticipated over time, aligning with Mr. Coscia’s insights.

Mayor Thomas P. Koch of Quincy articulated his vision of empowering residents to invest in bonds that support local projects, thereby directly influencing and enriching their quality of life.

Joseph Lubin, the CEO of Consensys, emphasized the transformative potential of tokenized digital municipal bonds in democratizing the muni market by reducing investment barriers and fostering community engagement. Lubin’s viewpoint resonates with the objective of revitalizing the community-centric essence of municipal bonds.

On a related front, startup Alphaledger delved into DLT-based municipal bond issuance towards the conclusion of 2022, underscoring a growing trend in the adoption of blockchain technology within the municipal finance sector.