Title: Private Bonds · EthSystems

URL Source: https://original.es-internal.pages.dev/use-cases/private-bonds/

Markdown Content:
---
description: 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.
title: Private Bonds · EthSystems
image: https://original.es-internal.pages.dev/og.png
---

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## Actors

Issuer · Investors · Crypto-Registry · Regulator · Oracles (valuation, payment) · Settlement venues (stablecoin network)

## 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:**

* **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 ([attestations](/patterns/pattern-verifiable-attestation/))
* **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:**

* 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**](/approaches/approach-private-bonds/).

**PoC Implementation:** [Private Bond PoC](https://github.com/ethsystems/pocs/tree/master/pocs/private-bond); two approaches: Custom UTXO (EVM) and Privacy L2 (Aztec).

## Open Questions

_Notes below reference the PoC implementation._

* Secondary market: RFQ model + pre-trade privacy requirements (what must be hidden?)
  * _PoC approach:_ Issuer acts as relayer and can serve as market matcher; peer-to-peer RFQ not in scope
* Minimum viable privacy: amounts/positions only vs parts of the term sheet?
  * _PoC approach:_ Amounts and positions hidden; legal entity identities can remain public (dual identity model)
* ISO 20022 relevance for bond workflows vs ICMA BDT usage

## Notes And Links

* **Tracking:** Public workstream in [ethsystems/pocs / private-bond](https://github.com/ethsystems/pocs/tree/master/pocs/private-bond)
* **Standards:** ERC-6123 (derivative/bond lifecycle), ERC-7573 (atomic cross-domain DvP), ICMA Bond Data Taxonomy (BDT)
* **Current standards:** ERC-20 tokens; HTLC sequences for DvP (to be replaced by ERC-7573)

#### Referenced by

approaches6
* [Atomic DvP Settlement](/approaches/approach-dvp-atomic-settlement/)
* [Private Bond Issuance & Trading](/approaches/approach-private-bonds/)
* [Private Smart Derivatives](/approaches/approach-private-derivatives/)
* [Private Trade Settlement](/approaches/approach-private-trade-settlement/)
* [Private Transaction Broadcasting](/approaches/approach-private-broadcasting/)
* [White-Label Infrastructure Deployment](/approaches/approach-white-label-deployment/)
use cases5
* [Private Corporate Bonds](/use-cases/private-corporate-bonds/)
* [Private Government Debt](/use-cases/private-government-debt/)
* [Private Messaging](/use-cases/private-messaging/)
* [Private Repo](/use-cases/private-repo/)
* [Private Stocks](/use-cases/private-stocks/)
RFPs2
* [Custody Controls Reference SDK](/rfps/rfp-custody-sdk/)
* [zk-SPV for Private Cross-Chain DvP](/rfps/rfp-zk-spv-dvp/)

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