DBS issues first tokenised bond on digital exchange
SINGAPORE (THE BUSINESS TIMES) – DBS is tokenising bonds to help investors better diversify their debt instruments.
The bank on Monday announced that it has priced a S$15 million digital bond as its digital exchange’s first security token offering.
The DBS Digital Bond, which comes with a six-month tenor and coupon rate of 0.6 per cent per annum, will be traded in board lots of S$10,000 – a significantly smaller denomination compared to traditional wholesale bonds, which typically require investment and trading amounts in multiples of S$250,000.
Security tokens are digital contracts for fractions of assets such as bonds, stocks, or real estate. Such transactions are made possible via blockchain technology.
In this case, the digital bond offering was done by private placement on the DBS Digital Exchange. DBS is the sole bookrunner for the transaction.
The bank’s group head of capital markets Eng-Kwok Seat Moey said the inaugural listing of a security token offering represents a new way of unlocking value for issuers and investors.
“We expect asset tokenisation to increasingly become more mainstream as more of our clients start to embrace security token issuance as part of their capital fund raising exercise which we believe will boost Singapore’s ambitions to be a digital asset hub in Asia,” she said.
This is also an opportunity for corporates seeking platforms to raise funds from private capital markets in the region. Asia-Pacific currently accounts for nearly one-third of the global private equity market, which reached a record US$4.73 trillion in 2020, according to figures from Bain and Preqin.
DBS’s global head of fixed income Clifford Lee said that while bond tokenisation exercises announced in Asia to date tend to take the form of repacking conventional bond issues, DBS’s current transaction combines existing legal and tax infrastructure requirements with a direct issuance on the digital exchange in smaller lot sizes.
Launched in December 2020, the members-only DBS Digital Exchange reported holding S$80 million in assets under custody as of the first quarter, with trading volumes at S$30 million to S$40 million. It currently serves 120 participants, comprising institutional and accredited investors. Earlier in May, DBS Private Bank launched a bank-backed trust solution for cryptocurrencies, which also builds on the digital exchange.
HSBC in April also completed a digital bond issuance on digital asset exchange Marketnode, in conjunction with a S$1 billion perpetual securities issue by Singtel Group. HSBC said the digital bond issuance was conducted along with a traditional bond issuance, as part of the Singapore Exchange’s ongoing pilot to assess the use of digital assets in streamlining processes within the Asian bond market.
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