By Josiah Wilmoth
Kenyan microfinance startup 4G Capital has unveiled plans to become the first financial institution to issue a tokenized bond using cryptocurrency.
Kenyan Microfinance Startup to Issue Tokenized Bond Using Cryptocurrency
In many ways, 4G Capital’s token sale will resemble the token generation events (TGEs) used to distribute utility tokens. However, unlike utility tokens — which provide holders with access to a product or service — 4G’s tokens are functionally the same as conventional bonds, meaning that they are securities.
As such, 4G Capital’s tokens will be issued on a regulated securities platform operated by Canadian tech startup Finhaven. Investors will purchase bonds using either bitcoin (BTC) or ether (ETH), and Finhaven will convert the funds to USD and send them to 4G Capital. Interest will be paid to bondholders in either cryptocurrency or USD.
Tokenized Bonds Provide Entrepreneurs in Emerging Markets with Access to Capital
4G Capital CEO Wayne Hennessy-Barrett acknowledged that the company was partly motivated to issue tokenized bonds to help promote the use of blockchain technology in Kenya — and perhaps convince the country’s regulators to soften their somewhat-hostile stance on cryptocurrency.
However, he stressed that entrepreneurs in Kenya have difficulty raising capital, and tokenized bonds provide a solution to this problem. Conventional bonds are expensive to issue, while banks have little incentive to underwrite business loans since financial regulations limit what they can charge borrowers.
“There’s a big gap in the market for small African businesses to raise working capital,” Hennessy-Barret said.
Elaborating on that point, Michael Kimani — chairman of the Blockchain Association of Kenya — told the Financial Times that 4G Capital’s use of cryptocurrencies as a way to tokenize their debt and raise capital is the “most logical use of cryptocurrencies.”
“What cryptocurrencies are doing is acting as a bridge to new sources of funding, to elsewhere in the world where there is more capital,” he said.
Strategic Coin is a leading research and advisory firm for companies planning to integrate blockchain capabilities into their business model via utility token launches. Our customer research reports provide qualitative and quantitative analysis of token use cases and platform value. With the Strategic Coin Advantage network of partners, we offer customized services for the pre-launch, full-launch, and post-launch phases of Token Generation Events (TGEs).
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