The volume of fixed income issued through distributed ledger technology surged in 2024 according to The Association for Financial Markets in Europe (AFME).
Its DLT market report showed fixed income issuance reached €3bn last year, up 260% on the €848m issued in 2023.
The adoption of DLT in capital markets remains modest relative to the total global volume, but AFME said its rapid growth presented ‘substantial opportunities for future expansion’.
The limited trading activity in DLT bonds meant price discovery was constrained, AFME said, but on the basis of the available data, their yields generally aligned with traditional fixed income instruments albeit with instances of a temporary premium.
Within the 260% increase, traditional markets such as fixed income are demonstrating their adoption of the developing technologies, and a movement towards digitalisation.
European issuance of DLT fixed income was led by the DLT trials undertaken by the European Central bank and Swiss National Bank, accumulating jointly a total of €1.8bn in 2024.
Most of the issuance was originated on public-permissioned blockchains, which accounted for €2.4bn, followed by private-permissioned blockchains contributing €509m, and public-permissionless blockchains for the remaining €275m.
The Corda and Canton blockchains were the most popular platform of choice with €1.3bn and €900m, respectively.
AFME’s evidence also point to the growing shift towards tokenisation in the funds industry. According to the report, market data indicates more than €2.1bn assets under management registered globally on 31 tokenised funds.
The US is the main domicile for tokenised funds including the three largest by Hashnote, which has since been acquired by Circle, BlackRock and Franklin Templeton.
WisdomTree took the title for the highest number of tokenised funds last year, with €27m across on 13 funds, mostly investing in US treasuries.
The report also highlighted other assets where tokenisation was growing, including asset backed securities, equity, real estate, and private credit, which accounted for $30.9bn.
The market-cap of tokenised equity reached $17.3bn last year, largely driven by the commodity focused company Enegra, that tokenised 100% of its shares.
Tokenised asset backed securities reached a market cap of $11.5bn, with real estate valued at $300m, and private credit at $1.8bn.
The in augural DLT Market Report from AFME aims to lessen the DLT data gap and highlight the integrations between traditional and digital finance that tokenisation is enabling.
