The Rise of Tokenized Securities in the Microfinancing Sector

Bitfinex Securities announced the launch of two new tokenized bond issues under an ongoing issuance program from Mikro Kapital’s securitization fund, ALTERNATIVE. This marks the second tokenized bond since the companies announced a Memorandum of Understanding in October last year.

Mikro Kapital is a Luxembourg-based microfinance and impact investment company founded in 2008. The company focuses on providing microcredit and financial services to small and medium-sized enterprises (SMEs) in emerging markets, particularly among countries in Central Asia and Europe.

The bond program will feature 11-month and 36-month bonds with 10% and 13.5% coupon rates, respectively. The bonds, issued on the Liquid Network, target raises between 500,000 and 10,000,000 USDt with a minimum investment of 125,000 USDt.

These bonds are part of a monthly issuance program that may expand to include additional durations and coupon rates in the future.

Jesse Knutson, Head of Operations at Bitfinex Securities, emphasized the collaboration’s role in merging traditional and crypto investments, aiming to innovate financial solutions for the microfinancing sector. As per Knutson,

“By leveraging the Liquid Network, we are introducing innovative financial solutions that merge the strengths of traditional and crypto investments. We are thrilled to continue our ongoing collaboration with Mikro Kapital and support them in bringing new forms of financing to the microfinancing sector through this latest tokenized bond issuance.”

The Liquid Network is a Bitcoin layer-2 solution developed by Blockstream. It is designed to enhance the functionality of the Bitcoin blockchain by enabling faster, more confidential transactions and the issuance of digital assets. It operates as a sidechain to Bitcoin, maintaining a 1:1 peg with Bitcoin through a process known as peg-in and peg-out.

Liquid allows for asset issuance, including regulated security token offerings. This network allows issuers to enforce transfer restrictions and create allowlists, ensuring regulatory compliance while enabling investors to self-custody, withdraw, and trade securities peer-to-peer.

Proceeds from this issue will be invested in microfinance and sharing economy projects, supporting small businesses and entrepreneurs in emerging markets. ALTERNATIVE, Mikro Kapital’s securitization fund, currently supports 180,000 end-borrowers across ten countries, with a loan portfolio of approximately €300 million. Notably, about 35% of the beneficiaries are women entrepreneurs in local and rural communities.

Mikro Kapital’s debut tokenized bond, completed in October 2023, raised over $5.2 million USDt and was the market’s first for microcredit. This latest offering builds on that success, aiming further to support small businesses and entrepreneurs in emerging markets.

The capital raise for these new bonds will begin on July 3 and conclude on July 31.

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