AFME is pleased to present the inaugural edition of its Distributed Ledger Technology (DLT) Market Report. This report provides a comprehensive overview of the primary DLT-based fixed income market, secondary market activity and valuations, repo transactions, and the growth of the tokenized fund industry alongside other tokenized assets.

Although the adoption of DLT in capital markets is currently modest relative to the size of global capital markets, its recent rapid growth and the emergence of new market participants and product offering present substantial opportunities for future expansion.

Among the main findings of this report:

• DLT fixed income issuance (including bonds, bills, commercial paper, covered bonds, and structured notes) reached €3bn in 2024, a 260% increase compared to 2023 (€848mn issued).
  • This growth was primarily driven by the European Central Bank (ECB) and the Swiss National Bank (SNB) DLT Trials, which accumulated €1bn and €0.8bn respectively representing 60% of the total fixed income instruments issued in 2024.
  • However, excluding central bank trials, DLT-based fixed income issuance doubled compared to the 2023 amount.
  • Financial issuers contributed with the largest issued amount with 47% of the total, followed by SSAs (43%) and corporates (10%).
  • In 2024, the majority of the issuance (75% of the total) was originated on public-permissioned blockchains, with the platforms SDX and HSBC Orion contributing the largest share of digital fixed income issuance.
  • Green bond DLT issuance accumulated a total of €483mn in 2024. This was predominantly driven by the Hong Kong Authority in a series of multi-currency tranches issued on HSBC's Orion platform.
• Price discovery and valuation: Price discovery in the DLT bond market faces constraints due to limited trading activity. Observable pricing data is predominantly available for instruments with traditional exchange listings. Available yield data suggests that DLT bond yields generally align with comparable conventional instruments, with limited instances of yield divergence of a temporary “e-premia” spread differential.
• Recent DLT-based repo transactions executed by global central banks' trials have highlighted several benefits, primarily from the almost instantaneous settlement execution. While comprehensive data on these transactions are still scarce, platforms such as Broadridge DLR have reported to process c$50bn per day in DLT-based repo transactions.
• More than €2.1bn in assets under management (AUM) are globally registered on 31 tokenised funds as of end-2024.
  • The United States leads globally as the main country domicile for tokenised funds, including the three largest funds held by Hashnote (AUM standing at €569mn), BlackRock (€500mn), and Franklin Templeton (€406mn).
  • More than 80% of the AUM was allocated into US and EU Government securities (€1.8bn), while only a small portion was invested in other asset classes, such as Equity, Crypto Assets, Real Estate, among others
• Market data indicates other use cases of tokenised instruments, including ABS (market cap at $11.5bn), equity ($17.3bn), real estate ($0.3bn), and private credit ($1.8bn).