With such support, the asset class is now seen as a must-have for our digital future. But despite the promise, cryptocurrency investments remain as volatile as ever with large— price swings and the potential for heavy losses until paying for crypto becomes commonplace.

So, it may come as a surprise that the volatile crypto market is making for strange bellows in the conservative municipal bond sector.

State and local governments aren’t issuing bonds in Bitcoin. However, they are starting to use some of crypto’s processes to remove the barriers to buying/selling muni bonds. With that, adding these assets could become much easier for smaller investors, reducing wide bid/ask spreads and creating transparent pricing.

When investors think about crypto, they do so from the point of view of the asset. In most cases, it’s cryptocurrencies like Bitcoin or Litecoin. It’s understood we are trading “digital dollars” from wallet to wallet and person to person. We spend our Bitcoin online to purchase goods and services. The idea is that Bitcoin and other cryptocurrencies can serve as a medium of exchange or be traded between parties.

Many of us don’t think about the process behind the scenes that makes Bitcoin work. But that background process is what puts the “crypto” in cryptocurrency.

With no central bank like the Federal Reserve or regulatory authority backing them up, digital assets like Bitcoin use cryptography/encryption to secure transactions and control the creation of additional currency units. The fifth-grade definition of cryptography is that computers fact-check these transactions by completing complex equations. After that, they store the transaction on a ledger. This decentralized digital ledger is called Blockchain, with each “block” containing data and linked in chronological order or “chain.”

This ledger has gained popularity with currency. While cryptocurrencies use blockchain, blockchain is not cryptocurrency. There is nothing stopping you from using this digital ledger to secure transactions of any asset — real or digital. And that’s important to note.

This brings us to the sleepy municipal bond market.

Most investors don’t realize that the global bond market and its trillions of dollars worth of value trades are based on a few phone calls and handshakes. After the initial issue, bonds trade on the over-the-counter bulletin board or OTCBB. For most bonds — aside from very liquid Treasuries — brokers will literally call each other and make deals over the phone. This creates wide bid/ask spreads and a lack of trading volume for many bonds.

For the municipal bond sector, this is a major headache. And with that, investment banks that underwrite bonds for clients have started to look at Blockchain as a way to improve this process. JPMorgan created its Digital Debt Service, while Goldman Sachs has created a rival service. Both use blockchain to help with the transaction process and smooth out any kinks that have often plagued the muni sector.

These new platforms have moved beyond the proof of concept into prime time. Michigan State University is looking into issuing a $38 million muni bond on Goldman’s platform to help pay for a new multicultural center. At the same time, JPMorgan has seen the City of Quincy, Massachusetts, issue approximately $10 million in bonds on its platform. Those bonds were later purchased by asset manager BlackRock for its iShares Short Maturity Municipal Bond Active ETF.

The creation of these platforms is significant, and using Blockchain in the sleepy municipal bond market could be a game changer for all stakeholders: issuers, underwriters, and investors.

The municipal bonds sector is a $4 trillion industry featuring vast inefficiencies. As we said, buying and selling munis is already tough. Traditional municipal bonds typically trade just once or twice a year. However, by using blockchain, there could be more frequent trading of bonds. And when there is increased trading of any asset, increased liquidity brings reduced risks. Pricing information can quickly be disseminated by all parties. Investors looking to sell have buyers to sell to.

Aside from the liquidity aspect and reduction of risks, there are other benefits to blockchain in the muni bonds sector.

One of them is the reduction of settlement time. While settlement times have improved and quickened pace, there is still a lag time between when cash and assets are exchanged between parties. These middlemen and clearing houses also take their share, with market-makers making a profit on the bid/ask spreads. This drag time can reduce gains and add friction to the process. But with blockchain, once the cryptography process is complete, the transaction is complete. This instant transaction creates a zero-wait settlement time for many asset classes.

This eliminates costs and redundancies across the traditional bond-buying platform and method. Issuers get their bonds to market more quickly, and investors have the opportunity to add these assets or sell them if necessary.

In the end, blockchain has the potential to transform the municipal bond market. Despite its huge size, trading, and accessibility to munis remain out of reach for many investors. Blockchain could improve that performance and accessibility.

Already, some states have begun considering issuing so-called mini-munis directly to individual investors at prices as low as $25 per bond. Blockchain ledgers would make this sort of transaction possible.

Moreover, BlackRock’s use of JPMorgan’s platform to buy assets for an active ETF is also impressive. This allowed the asset manager to add a needed bond to its portfolio without skipping a beat.

Now, there are potential risks to be had. Much of the low volatility associated with munis could be gone. The investor base tends to be a buy-and-hold group. Adding liquidity is great but could bring an unintended consequence to the sector. Many investors who use munis — insurance funds, pensions, and endowments — count on munis trading for roughly the same price for their history. Mark-to-market accounting could hinder some of their financing and regulations.

However, the benefits of using blockchain could outweigh many of the potential pitfalls, and investors could be happy with the technology’s potential within the muni sector.

With a successful sale and future issues, blockchain has come to the world of municipal bonds. By using a digital ledger for transactions, many inefficiencies associated with municipal bonds and their buying/selling are now reduced. For investors, issuers, and underwriters, this is a huge win.