Startup Bond.One has passed a significant milestone in automating the issuance and administration of structured debt products with the first debt issuance on its blockchain-based platform.
Bond.One issued a $100,000 promissory note under section 4(a)(2) of the Securities Act of 1933 for the autism-charity McCarton Foundation, John Mizzi, chief strategy officer at Bond.One told Markets Media.
“It is a relatively small amount, but one that we thought could demonstrate the system,” he said.
The foundation used the platform to structure and originate its debt product and will use it throughout the instrument’s lifecycle to handle interest and principal payment processing; transfer and administrative responsibilities, including booking transactions and recording investor information.
Although the platform supports the automation of many roles, Bond.One does not expect it to disintermediate broker-dealers, depository banks, custodian, or trustees from a debt instrument’s lifecycle, Mizzi added.
The vendor designed the platform to provide a secure manner to record, organize, and distribute security information and transaction data in a transparent fashion for Regulation D, Regulation S, Regulation A, and public debt offerings.
The platform operates as a permissioned network, which Bond.One initially will manage, on top of the ethereum blockchain. The vendor has incorporated the Quorum consensus architecture and hosts it on the Microsoft Azure Blockchain service.
The platform also uses tokenized smart contracts, known as BlockBonds, that codify each instrument’s terms and conditions as well as provide the automated administration.
Bond.One employs an internally developed scripting language for BlockBonds, which includes debt-related terms and fields.
“This goes beyond ERC-20 smart contracts,” said Mizzi.
Looking forward, Bond.One has not decided whether to move into supporting trading in the secondary market. Nor has that vendor decided whether to support the fractionalization of debt instruments on the platform.
“Where the Securities and Exchange Commission is today, I don’t think it’s a good idea at this time,” he added.
