Protocol Obligate ramps up push to boost institutional blockchain use

On-chain debt capital markets platform deploys on Coinbase-incubated layer-2 after structured investment products push


Obligate and Adobe modified by Blockworks


On-chain debt capital markets platform Obligate has launched on Coinbase’s layer-2 network.

This new deployment aligns with the protocol’s strategy to increase institutional engagement with blockchain-native assets. It comes just after the Switzerland-based firm made its initial entry into on-chain investment products; a decision that aligns with a larger trend across the industry.

Obligate lets companies issue on-chain bonds and other debt securities to receive funding from investors. These bonds, initially issued via smart contracts on Polygon, have now expanded to another venue. 

The deployment on Base — a Coinbase-incubated layer-2 built on the Optimism stack and launched in July — “represents a paradigm shift in the integration of blockchain technology into institutional finance,” according to Matthias Wyss, Obligate’s head of strategic partnerships.

Read more: The ‘crypto degen crowd’ has settled in on Coinbase layer-2, Base

“Our capabilities are especially relevant in the current macro environment as they allow small- and medium-sized enterprises cheap and efficient access to debt capital, which is crucial in the rising interest rate environment,” Wyss told Blockworks.

Obligate issued its first bond on the Polygon blockchain in March. Investors in the protocol include Blockchange Ventures, Circle Ventures, Earlybird and SIX Fintech Ventures.

Investors fund their orders into escrow before capital and bonds are exchanged, according to the company’s site. From issuance to maturity, investors hold ERC20 bond tokens in their wallets and — unless transfer limitations are set by the issuers — can move or sell them to other wallets. 

Users receive payment redemption tokens at maturity, at which time the investors can burn their tokens for the final payments. Issuers can also secure their bonds with collateral, leading to the liquidation of that collateral in the case of default. 

The deployment to Base comes a couple weeks after STS Digital issued a structured investment product — a barrier reverse convertible linked to bitcoin — on Polygon as an Obligate eNote.

Obligate said in a Nov. 15 blog post that it intends to build “an extensive product suite alongside a broad spectrum of digital asset services” — including products with “bespoke payoff profiles.”

Moving real-world assets onto the blockchain via tokenization has gained steam in recent months as financial players and investors seek to boost efficiency and lower costs.

Read more: BlackRock CEO touts tokenization, warns US ‘lagging’ in innovation

Various projects have sought to offer on-chain access to US Treasury securities, for example — the largest and most liquid government bond market globally.

Traditional finance giants, such as JPMorgan, continue exploring ways to use blockchain technology. The company most recently carried out tests designed to let fund managers tokenize their portfolios on chosen blockchains. 

Wyss said all institutional blockchain applications reaffirm the path to a future where all capital market transactions are issued and settled on-chain.

“We already see an expansion of blockchain native assets along the risk curve from payment to debt to equity and, as pioneered by Obligate recently, to structured investment products,” he added. “This will continue to grow with the…institutional adoption of Tier1 [traditional finance] players.”

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