Canada should explore tokenized bond issuance to broaden its investor base, reduce concentration risk, and modernize its debt infrastructure at a time of rising global competition for capital.
Key Takeaways:
- Canada's debt issuance model, while functional, is vulnerable to concentration risk. The current system relies on a small group of primary dealers as intermediaries, and in an era of surging global competition for capital, this limits the government's flexibility and pricing power at auction.
- Tokenized bond issuance could widen participation and lower funding costs without the pitfalls of past retail programs. By enabling institutional investors and individuals to access Government of Canada securities through a permissioned blockchain platform, tokenization could boost auction competitiveness and revive a modern version of the Victory Bond, minus the subsidized yields and administrative burden that sank the old savings bond program.
- The case for tokenization extends beyond debt management into broader financial infrastructure. A tokenized sovereign debt platform could anchor a regulated Canadian stablecoin ecosystem, make cross-border marketing of Canadian debt far more efficient, and create constructive competitive pressure on the existing dealer network — all while positioning Canada as a financial innovator rather than a follower.
