The capital market in Bangladesh continues to grapple with trust issues, as IPO fraud and manipulation persist despite efforts to address them, eroding investor confidence and hindering economic progress. The long-term stability of the market and the overall national development are at risk.
The country has faced significant challenges in the past. Major market crashes in 1996 and more notably in 2010–2011 resulted in the destruction of an estimated $27 billion in market value, equivalent to about 22 percent of the GDP at the time. These crashes inflicted losses on millions of investors, leading to enduring social ramifications that influence public trust in the stock market to this day. The fundamental structural weaknesses that contributed to these crises remain unresolved even more than a decade later.
Recent enforcement statistics underscore the severity of the situation. Over the past 18 months, the Bangladesh Securities and Exchange Commission (BSEC) has imposed fines totaling nearly Tk 1,488 crore on individuals involved in manipulation and misconduct. However, only a fraction of these fines has been recovered due to prolonged legal battles. This disparity between penalties imposed and actual accountability sends a troubling message that misconduct may be costly on paper but lacks real consequences in practice.
The root causes of these failures lie in systemic deficiencies, such as coordinated trading through omnibus accounts, misuse of placement shares, diversion of IPO funds, and a lack of real-time surveillance mechanisms. Bangladesh’s market capitalization remains relatively low, standing at around 6 percent of the GDP in mid-2025, in stark contrast to over 100 percent in more developed and efficiently managed markets. This underdevelopment poses challenges for financing critical sectors like infrastructure, small and medium enterprises (SMEs), and industrial expansion, which are essential components of the Vision 2041 and the “Smart Bangladesh” agenda.
While fraud remains a global concern, technological advancements have enabled more effective management of such risks. Following high-profile scandals like Enron and Madoff, regulators worldwide have increasingly turned to artificial intelligence (AI) for real-time monitoring and surveillance. Exchanges are exploring the use of blockchain technology for faster, more cost-effective, and transparent settlement systems. Emerging economies like India and Brazil have embraced digital reforms to enhance disclosure, monitoring, and enforcement practices.
In contrast, Bangladesh still heavily relies on manual oversight and fragmented data systems. In an era where cyber-enabled scams are prevalent, this outdated approach is inadequate. Given the heightened vulnerability of a small and fragile market, each crisis inflicts disproportionate harm and deters potential investors. The adoption of modern technologies presents a significant opportunity for transformation.
Blockchain technology has the potential to revolutionize initial public offerings (IPOs) and securities transactions by ensuring that every transaction is securely recorded, time-stamped, and visible to authorized participants in a permissioned blockchain network. Smart contracts can automate IPO processes, ensuring that funds are released only upon meeting specified criteria, allocations are transparent, and lock-up periods cannot be circumvented. The immutable nature of blockchain records helps prevent manipulation.
AI can complement blockchain by serving as a real-time surveillance tool. AI algorithms can analyze trading patterns, detect unusual activities, and identify coordinated networks more efficiently than traditional monitoring methods. Leading exchanges that have integrated AI-driven systems report reduced false alarms and faster enforcement actions.
The combination of blockchain and AI technologies creates a robust regulatory framework: blockchain ensures data integrity, while AI provides intelligence and early detection capabilities. Such systems could identify suspicious IPO activities, trigger halts during abnormal market behaviors, and provide regulators with immediate, evidence-based alerts. Privacy-enhancing technologies can safeguard sensitive data.
In Bangladesh, the implementation of these technologies can be phased in gradually. Conducting pilot IPOs integrated with the central securities depository would enable testing and scalable deployment. International experiences suggest that such reforms can mitigate fraud risks, shorten settlement cycles, enhance liquidity, and restore investor confidence.
A regulatory sandbox initiative led by the BSEC in collaboration with the Bangladesh Bank could test blockchain-based e-IPO systems and AI surveillance tools. Capacity building is crucial, involving the training of regulators, auditors, and intermediaries to oversee data-centric systems. Collaboration among exchanges, depositories, banks, and technology providers will be essential for successful implementation.
The initial focus should be on targeted pilot projects, such as blockchain-enabled IPOs and AI surveillance in the secondary market, before expanding these initiatives. This phased approach minimizes disruption while signaling a commitment to meaningful reform.
Bangladesh is well-positioned to leapfrog ahead in adopting these technologies. With high mobile penetration, a tech-savvy young population, and robust policy support under the Smart Bangladesh Master Plan, the country has a solid foundation for technological advancement. While advanced economies have refined their systems over decades, late adopters like Bangladesh can swiftly deploy mature technologies to enhance market efficiency.
The consequences of inaction are evident: recurring scandals would constrain growth, deter foreign investments, and drive savings into informal channels. Conversely, proactive measures would lead to a transparent market that channels savings into productive investments, reduces risk
