2026 Perspectives for the Public Sector

The Pre-Issuance Phase: Revolutionary Steps Across Preparation and Structuring The global financial landscape is undergoing a period of significant technological advancement. The traditional bond market, particularly the vast Eurobond market with an outstanding value of €14.6 trillion, operates on an established infrastructure that, while reliable, presents opportunities for increased efficiency. 6 The integration of DLT, smart contracts, and tokenization represents a fundamental shift, creating more efficient, transparent, and accessible financial ecosystems. For public sector entities, these technologies can assist in optimizing debt management, enhancing investor engagement, and implementing new models for financing critical infrastructure and sustainable development goals. The move to digital bond issuance adds new strategic dimensions to the pre-issuance phase. While the core principles of sound financial planning remain, public sector issuers must navigate an evolving landscape of technology and regulation. From an Agency & Trust provider’s perspective, this phase is critical for mitigating risk and ensuring a smooth lifecycle for the digital asset. “In the debt capital markets, many of the world’s leading banks, technology companies, advisers, consultants, law firms and platforms are devoting significant resources to the development of digital bonds and the creation of a market that brings speed and efficiency for issuers and investors .” OMFIF Digital Assets 2024 Key considerations in the preparation and structuring phase of issuing digital bonds include: • Legal and Regulatory Frameworks: The regulatory environment for digital assets is developing quickly. Jurisdictions such as Germany, with its Electronic Securities Act (eWpG), and Luxembourg, have established legal certainty for DLT-based securities. Issuers must engage proactively with regulators, utilizing regulatory sandboxes like the EU’s DLT Pilot Regime or the UK’s Digital Securities Sandbox, to ensure compliance. As an issuing and paying agent (IPA), Citi plays a key role in this stage by helping to ensure the proposed structure of the digital bond is compatible with the legal and operational requirements of the chosenmarket infrastructure. • Technological Infrastructure: Choosing the right DLT platform is a critical decision with long-term implications for security, scalability, and interoperability. Public sector entities must assess the trade-offs and collaborate with technology partners to design a robust infrastructure. A key challenge is ensuring interoperability, not only between different DLT networks but also with traditional financial market infrastructures to maintain liquidity and broad investor access. • Market Adoption and Investor Confidence: Digital bonds require a new level of investor education. Issuers must clearly articulate the benefits and mechanics of the new instruments. Early issuances by leading multilateral institutions such as the World Bank and the Asian Infrastructure Investment Bank (AIIB) have assisted in building market confidence. 6 https://www.euroclear.com/newsandinsights/en/Format/Articles/energising-the-siu.html Citi Perspectives for the Public Sector 49