ABSTRACT
Financial markets have expressed high expectations for the transformative potential of disruptive technologies, such as distributed ledger technology (DLT), the technology underpinning cryptocurrencies such as Bitcoin, which are commonly known as Blockchain.
This hope ranges from that of risk-free monetary systems without any interference from states and associated political risks to more modest aims related to improved bookkeeping systems. The hope that DLT and their related inventions will produce game-changing benefits for market actors and society as a whole have also spread to the field of sovereign financing.
This chapter discusses the main benefits of DLT in the context of sovereign financing, in particular, but not limited to, sovereign borrowing. A key concern is how the technology may affect core challenges that the legal framework governing sovereign borrowing currently is facing: (i) collective action problems among creditors, making it challenging to solve sovereign debt problems and ii) investors’ challenges related to enforcement of debt claims against states.
