One of Asia’s leading banks, DBS, has stated that it will start issuing tokenized bonds to expand its debt instruments. The digital bond has been priced at SGD 15 million and will be the first security token offering issued by the DBS Digital Exchange (DDEx).
The DBS Digital Bond will be issued over six months at a coupon rate of 0.6% annually. It will be issued in groups of SGD 10,000, which is typically smaller than what is issued in traditional bonds that are issued in lots of SGD 250,000.
Security Token Offering
A security token is a digital contract that deals with a fraction of an asset and it is powered through blockchain technology. DBS issued its digital bond through the DBS Digital Exchange.
Speaking during the announcement, Eng-Kwok Seat Moey, the Head of Capital Markets at DBS, stated, “Our maiden STO listing on the DBS Digital Exchange is a significant milestone, as it highlights the strength of our digital asset ecosystem in facilitating new ways of unlocking value for issuers and investors. This cements our ability to provide integrated solutions across the digital asset value chain, from deal origination to tokenization, listing, trading, and custody, which in turn opens the door for more STOs on DDEx.”
Clifford Lee, the global head of fixed income at DBS, also stated that previous bond tokenisation in Asia was usually traditional. Still, the current issue from DBS will incorporate blockchain technology into the existing legal and tax frameworks.
DBS and Blockchain
The DBS Digital Exchange was created in December 2020. According to the financial results for the first quarter, the exchange currently holds around SGD 80 million in assets under management. The trading volumes for that period reached SGD 30 million to SGD 40 million.
The exchange currently serves around 120 institutional investors. In early May, DBS Private Bank created a trust solution for investors who want to invest in cryptocurrencies.
Digital bonds are an ideal opportunity for businesses that are seeking to raise capital in the Asian region. The Asia-pacific region has a large clientele base and accounts for almost a third of the global private equity market. If DBS can increase its reach in this market, it will achieve its market expansion goals in the region.
Besides DBS, other firms have also engaged in digital bond issuance. This includes HSBC who issued its tokenized bonds on Marketnode digital exchange. According to HSBC, its digital bond issuance was done in the traditional perspective according to the guidelines provided by the exchange as part of the exchange’s pilot phase to assess the use of digital assets in the Asian market.