On Friday, the US startup said that Alphaledger registered three US municipal bond issues on its permissioned blockchain. However, for now these are parallel records.

The key benefits of using blockchain are increased transparency and lower costs. The distributed ledger is being used for a wide range of digital asset and bond issuances, often because efficiency gains make smaller issuances more practical. In the United States, the vast majority of bond issues are in the less than $50 million category.

According to SIFMA, in 2021, 13,000 municipal bonds were issued for a value of $482,000 million. When it comes to US fixed income, the value of outstanding municipal bonds is the fourth largest, after Treasuries, mortgage-related and corporate bonds.

Recording the issuance on a blockchain is just the first step planned by Alphaledger, which is aiming to use smart contracts for on-chain clearing and custody.

The company was founded in 2019 by a core team of former PIMCO founders and initially focused on the municipal lending market to digitize a highly manual process. This allows community bank investors to expand their reach beyond the local area. Diversifying their portfolios reduces their exposure to hyperlocal environmental risks.

In addition to recording loan issuances, Alphaledger has evolved its activities to record a sale of loans in the secondary market and record the origination of municipal securities (parallel record keeping).

“Schools, water, power, highways – this is vital infrastructure for America’s growth that has been difficult to access directly for investors in the traditional financial system,” Alphaledger co-founder Manish Dutta said. “Alphaledger is designed to provide greater transparency, traceability and accessibility for towns and municipalities that issue bonds and to support investors seeking to access the returns they offer.”

While Alphaledger is primarily a technology company, to facilitate transactions on the platform, it has a FINRA-registered broker-dealer and transfer agent subsidiary, Iris Technology.

Meanwhile, in 2020, blockchain startup ConsenSys acquired an American stockbroker with the goal of tokenizing the municipal bond market, with a vision similar to Alphaledger.

Many companies are developing blockchain bond issuance platforms, and several state-backed organizations have used blockchain to issue bonds, but only a few are in the municipal market. Examples of issues include the World Bank, the European Investment Bank (EIB), and government consumer bonds issued in the Philippines and Thailand.

On the corporate side, last month saw the largest blockchain issuance to date by UBS for 375 million Swiss francs ($370 million).