Municipal Bonds on the Blockchain
In Spring 2018, Neighborly is tokenizing public finance, in order to bring blockchain’s transformative potential to municipal bonds.
Neighborly’s mission is to modernize access to public finance, the multi-trillion dollar global market that builds vital public projects like schools, parks, and libraries. Public finance can and should be the source of capital used to build next-generation infrastructure like municipal broadband and community solar.
At Neighborly, we believe that:
- Communities with healthy economic fundamentals and a willingness to share relevant financials should be able to responsibly borrow precisely what they need, when they need it, starting with their own constituents as lenders of first resort.
- Investors seeking high quality fixed income returns should enjoy direct access to investing in tangible, demonstrably world-positive public projects.
- Innovative public projects like community solar hold the keys to fixing some of our planet’s largest challenges, like the need to decarbonize, at the scale of individual communities. As a single planet species, it is becoming increasingly urgent that we solve such problems.
- Public finance as an industry can and should exist to serve such projects, but, at present, it largely does not.
- In public finance, all “deal” data should be public, rather than the proprietary information of a select few banks, consultants, and their friends.
- Regulators who serve to protect investors will have much greater oversight and the ability to work effectively thanks to the transparency tokenized municipal bonds will bring about.
- Less friction in public finance means more vital public projects and more investors, which means a healthier market and better outcomes for all.
- The middleman-laden cost structure and cartel-driven nature of today’s public finance industry invisibly guides the nature and scale of the public projects we build in the world, usually away from the best interest of the borrowing community (and the end investors).
- Recasting the incumbent cost structure and opening up new possibilities made possible through the blockchain (e.g. Official Statements = smart contracts) unleashes the full potential of public finance.
Thus, we believe it’s essential to rapidly rethink how capital flows into public project solutions.
Investing in Tailored, Real World Impact
To us, the soaring demand for impact investing represents a global shift in consciousness towards doing well financially by doing good in the world. Impact investors will, with the right access, help solve our world’s largest problems. We believe that the fresh perspective of tokenized public finance will help impact investors remember that the humble municipal bond is the original impact investment, with over two centuries of schools, parks, and libraries before that term was coined.
Followers of our journey will remember that we set out to tokenize public finance in early 2015, months before the initial release of Ethereum, but were convinced that doing so represented a distraction. It was blindingly obvious to us after reading Melanie Swan’s book Blockchain, who gave a Lunch & Learn to the Neighborly team at our office.
We’ve known since then that tokenizing municipal bonds is the only viable path to achieving our mission. But, we needed to build all of the legal and software infrastructure to meet all current US and local regulatory requirements, which takes considerable time, energy, and attention to detail. And, in early 2015, there wasn’t much production-ready infrastructure in the blockchain ecosystem.
Since then, we’ve built all legally required systems needed to create and distribute municipal securities. This year we’ve connected over $100 Million to public projects around the US. During that time, the crypto ecosystem has flourished. The timing seems right in our view.
We’re hiring ultra strong engineers to build the future of public finance with us, and exploring collaborations with top innovators in the now-thriving crypto space, including TrustToken on the ownership side, Dharma.io on the asset creation side, and Sequence as a ledger. If you know anyone who would be interested in joining us, or any projects we should look at before diving in, intros and advice are most welcome and appreciated.
Of all applications in finance, public finance belongs on the blockchain. It’s our duty and honor at Neighborly to make that happen, guided by our mission to unleash the full potential of public finance. We’re hiring all stars to build with us, seeking innovative US-based issuers to pilot, and connecting investors with opportunities to do well financially by doing good in the world. Join the revolution.