bearer paper
Bearer paper is a negotiable instrument, document of title, or proof of security that is payable to whoever possesses it. Common examples include bearer bonds or checks endorsed in blank. An instrument endorsed in blank has a signature without designating a specific payee, allowing it to be transferred by mere delivery.
Bearer paper contrasts with order paper, which is payable only to the named payee or to someone authorized by that payee's endorsement.
Like other negotiable instruments, bearer paper can be transferred between parties. Because ownership is based solely on possession, bearer instruments have historically been associated with money laundering and other illicit activity. In response, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) imposed substantial tax penalties on the issuance of new bearer instruments, effectively eliminating them from the U.S. market. Although there was initially an exemption for bonds sold to foreign investors, this was eliminated by the Hiring Incentives to Restore Employment Act in 2010.
Bearer bonds issued before TEFRA remain redeemable in the United States without penalty.
[Last reviewed in July of 2025 by the Wex Definitions Team]
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