In a bid to encourage retail investment in small municipal bonds, ConsenSys Digital Securities LLC (CDS), the in-house broker-dealer of Ethereum venture ConsenSys has acquired Heritage Financial Systems Inc. The acquisition will enable CDS to use Codefi in the tokenization of smaller municipal bonds to reduce its high costs of issuance and management, according to a blog post on February 4, 2020.CDS Acquires Heritage Financial Systems Inc.
Per the blog post, ConsenSys Digital Securities LLC (CDS) has acquired brokerage firm Heritage Financial Systems Inc. to tokenize mini municipal bonds on the blockchain.
According to the team, this tokenization will be made possible using the ConsenSys Codefi software, a product suite that digitizes financial instruments and builds customized decentralized applications.
Also, the aim of this tokenization is to provide municipal bonds in smaller denominations for local residents to enable them to invest in community projects.
And at the same time, reduce the high cost of selling, distributing, and managing mini municipal bonds.
Per the team, it is just as expensive to issue and manage small bonds as it is the case of a multi-billion dollar bond.
As such, this high costs prevent scaling of mini municipal bonds since it poses barriers for smaller firms looking to enter the municipal bond market.
Despite this high cost, there is still a high demand for small bonds with lower denominations by retail investors, since these bonds help in the development of community infrastructure projects.
In 2017, for instance, Lawrence, Kansas issued around half a million dollars of bonds with the aim of purchasing a fire truck for the community, while in 2014, Denver sold $12 million in mini municipal bonds in 20 minutes.Municipal Bonds are Now Too Expensive for Local Residents to Invest
However, the focus of lat...