Use Case
Institutional bond issuance and trading on public blockchains where volumes, prices, and positions must remain confidential to prevent front-running and strategy exposure. The solution requires confidential amounts and positions with selective regulator visibility, atomic delivery-versus-payment (DvP) settlement, while maintaining public-chain finality and economically viable daily settlement cycles.Business Context
Actors: Issuer · Investors · Crypto-Registry · Regulator · Oracles (valuation, payment) · Settlement venues (stablecoin network)Additional confidential business context is available in the private IPTF repository.
Problems
Problem 1: Transaction Privacy with Regulatory Compliance
Public chains expose volumes, prices, and positions by default, enabling front-running and competitive intelligence gathering. Institutions require transaction-level confidentiality while maintaining selective disclosure for regulatory compliance.Requirements
Requirements
- Must hide: amounts, positions, trade details (issuance + secondary); ideally RFQ/order size pre-inclusion
- Public OK: legal entity identities; existence of transactions/events (no figures)
- Regulator access: scoped viewing keys and/or ZK proofs; access logging via attestations
- Settlement: atomic DvP; minutes-level finality acceptable; daily cycles
- Ops: predictable L2 costs (post-4844), append-only encrypted audit log with on-chain anchors; key rotation & retention policies
Constraints
Constraints
- Regulatory compliance (crypto-register integration where required)
- Production timeline: 1–2 years
- Avoid HTLC brittleness
- Infrastructure costs viable during adoption phase
Recommended Approaches
See detailed solution architecture and trade-offs in Approach: Private Bonds.Proof of Concept Implementation
Private Bond PoC
Two implementation approaches: Custom UTXO (EVM) and Privacy L2 (Aztec)
Open Questions
Secondary market RFQ model and pre-trade privacy
Secondary market RFQ model and pre-trade privacy
What transaction details must be hidden in the secondary market? The PoC approach uses the issuer as a relayer and market matcher, with peer-to-peer RFQ not yet in scope.
Minimum viable privacy scope
Minimum viable privacy scope
Should privacy cover amounts/positions only, or extend to parts of the term sheet? The PoC approach hides amounts and positions while allowing legal entity identities to remain public (dual identity model).
ISO 20022 relevance for bond workflows
ISO 20022 relevance for bond workflows
How does ISO 20022 messaging integrate with bond workflows compared to ICMA Bond Data Taxonomy usage?
Standards & References
- EIP-6123 - Derivative/bond lifecycle management
- ERC-7573 - Atomic cross-domain DvP settlement
- ICMA Bond Data Taxonomy (BDT) - Industry standard for bond data
- Current standards: ERC-20 tokens; HTLC sequences for DvP (to be replaced by ERC-7573)
Umbrella issue: iptf-pm#4
Related Resources
- Private Derivatives - Similar patterns with daily cadence and oracle dependency
- Private Stablecoins - Settlement infrastructure for bond payments
- Approach: Private Bonds - Detailed technical architecture