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Stable Income Bonds Are The Next Big Thing

09-23-2020 09:33 PM CET | Business, Economy, Finances, Banking & Insurance

Press release from: India Blockchain Forum

The interest rates around the world have shattered, the printing presses of the government is working in full swing to print the helicopter money. What is that? In the times of COVID when the majority of the workforce is struggling to return back to normalcy with the fear of losing a job at any time, the government decided to give free money to the people. Though, the money paid being paid by the government does not solve the liquidity issues of most of the workforce it did bring some money into the system. As of now, the world is enjoying the helicopter money, but it is for sure that the party will end one day.

In some countries like India, the helicopter money being given by the government is not even enough to cover the monthly expenses and is being selectively paid to a certain underprivileged section of the society.

In these tough times, the people who used to survive on returns generated by their fixed deposits are the worst hit. Take the example of India, the interest rates are now as low as 5% annually. Two years back, the interest rates were in the range of 8-9%. In this era of economic meltdown and uncertainty, how can one generate consistent income without exposing themselves to unwanted risks?

This transformation calls for a technological upgrade of the investor's mindset. The action is slowly shifting towards the crypto markets, a new way of earning a passive stable income is to either buy bonds issued over the Blockchain or to simply stake the crypto holdings. Let’s start with staking, it is a form of earning stable income by simply holding the crypto assets in the wallet (a kind of bank account for crypto).

Staking is not similar to buying a fixed deposit, it carries a risk of losing money as the value of underlying assets/or the assets which you have staked may lose value. It's just like buying shares and pledging them with your stock broker, you may generate a monthly income but there is a constant risk of losing the value of underlying assets. If the value of your underlying asset falls, the loss may be higher than the interest earned. Hence, it is not a good investment option for those investors who do not wish to take any risk.

What’s the solution? The new form of Blockchain issued debt is now emerging. The benefit is that the debt is issued by stable issuers with a stable business model who timely reports their financials. In the case of crypto staking, the biggest risk is that the issuer of coins or tokens remains anonymous. You may invest in the well-hyped token but at a later point in time, you may find yourself in the soup.

In the case of stable bonds, the issuer of the debt is the company and it carries a legal liability towards their actions. It is the need of the hour that traditional finance should foray into the crypto space, it will certainly improve the reputation of the crypto space.

So do you consider investing in stable bonds? Yes, if you are ready to head towards the new technology called Blockchain and foray into the crypto space.

Ok, how to purchase stable bonds? The simple way to buy stable bonds is to either purchase with fiat currency or to exchange your existing crypto with the bonds. The stable bonds ensure regular income and they very well satisfy the requirements of the crypto exchange who avoid security tokens for the purpose of listing.

The stable bonds issued over the blockchain are not the security tokens in general. The ownership of these bonds vests with the issuer, however, the representation of bonds through tokens vests with the buyer. These are basically the utility tokens.

The stable bonds have a pre-defined tenure. The stable bonds issued over the blockchain are usually of short term, less than 24 months. At the end of the tenure, the issuer buy back the bond coins from the investors and returns the money. You receive a monthly interest rate and the value of your investment does not change. In the course of trading, the bond value may go up and down but one can be sure that the end of the tenure of the bond it will bought back at the invested value.

There are few risks attached to investing in bonds. The primary ones are Liquidity Risk and Default Risk.

Liquidity risk is the scenario where there may be no buyers of your bond coins when you want to sell or no sellers when you want to buy. This may complicate both the entry and exit for the investors. The blockchain issued bonds ensure constant liquidity, but the risk of liquidity cannot be ruled out.

Default Risk is a risk where the issuer of the debt defaults on the payment. Most of the bond offerings over the blockchain are done by the stable issuers who have sufficient asset coverage ratio. Secured bonds extra layer of safety.

Bonds have an advantage that they are bought back the issuer, hence even in the scenario of no or less liquidity, the bonds will still be bought back and you will receive your invested value at the end of the tenure.

Investing in the bonds issued over the blockchain provides an excellent interest rate arbitrage. The interest rates in the western world are now negligible whereas the bonds issued by the Asian issuers still offer more return.

Under this arbitrage, without registering locally in the issuers country still the investors can buy bonds.

Bonds are traded like shares. The best part is that they are not highly volatile in nature. The price hardly moves 1-2% in the day. Many professional traders take benefit from bond trading and they ensure liquidity in the market.

Key Upcoming Bond Offerings - EGW Capital, the blockchain investment bank has issued the US $10 million worth of bonds. The bonds are already purchased by the underwriter and are now seeking a secondary listing on the market. The existing bondholders will build a liquid market for the bonds where both entry and exit will be simplified for the investors.

The bond coins issued by EGW Capital are 100% asset-backed and ensures safety to the investor. EGW Capital is a stable issuer with sufficient asset coverage.

India Blockchain Forum
Postal Address: Times Square Unit 1, Level 2, B Wing, Maharashtra 400059
Press Contact: Akriti Ahuja

The India Blockchain Forum is an international blockchain society. The Group works with the world’s leading blockchain policy experts to develop industry best practices and help shape global regulatory interoperability.

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