Definition:
Bearer bonds are bonds that are not registered to a specific owner. Instead, they are physically held by the person in possession of the bond. The holder of the bond is entitled to receive interest payments and principal upon maturity.
Key characteristics of bearer bonds:
- No registration: Bearer bonds are not registered to a specific owner.
- Physical possession: The holder of the bond physically possesses the bond.
- Anonymous ownership: The ownership of a bearer bond is anonymous.
- Transferability: Bearer bonds are easily transferable by simple delivery.
- Tax implications: Bearer bonds can have tax implications, as the holder is responsible for reporting and paying taxes on interest income.
Why were bearer bonds used?
- Anonymity: Bearer bonds were once popular due to the anonymity they provided to investors.
- Ease of transfer: They were easy to transfer, making them a convenient investment option.
However, bearer bonds have become less common in recent years due to concerns about tax evasion and money laundering. Many countries have imposed restrictions on the issuance and trading of bearer bonds.
In essence, bearer bonds are bonds that are not registered to a specific owner and are physically held by the person in possession of the bond. They were once popular but have become less common due to concerns about tax evasion and money laundering.
