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Opinion | As central banks explore digital currency, could NFT bonds be the future?
- Non-fungible tokens as bonds are a new concept but could help establish central bank digital currencies, and offer cheaper and safer transactions
- It could also help central banks access alternative forms of financing and digitise traditional asset vehicles
Reading Time:3 minutes
Why you can trust SCMP
Non-fungible tokens (NFTs) have exploded in popularity over the last year or so, their adoption increasingly commonplace as more people take up digital currency. As unique digital tokens, NFTs are typically used for collectible items such as artwork or music, and exist as units of data on a blockchain with extra information stored in them.
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While copies can be made, the value of the NFT itself is due to its one-of-a-kind nature, and also set by the market and by demand.
In contrast, traditional investment vehicles such as stocks and bonds are considered fungible, which means that every unit is essentially interchangeable. For example, one unit of ordinary stock in a company is the same as another, and is treated as such.
However, bonds could be made non-fungible. Doing so would transform the traditional asset vehicle into one aligned with the latest digital currency initiatives being introduced by central banks all over the world.
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SCMP Explains: What are NFTs?
SCMP Explains: What are NFTs?
Here, I wish to examine several use-cases of modernising the traditional bond while diving deeper into the implications of a potential NFT bond within a central bank digital currency framework.
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