Tokenization: DBS Takes Another Step for Mainstream With Digital Bonds

Singapore-based bank DBS has priced an SGD 15 million digital bond on the DBS Digital Exchange (DDEx), marking the operator’s first Security Token Offering (STO).

Security token offerings are all the rage and everyone is having their first take on them. In the United States, INX Limited announced it would be listing its token as the first SEC-registered digital security.

Back to Singapore, the DBS Digital Bond was done by way of private placement and paves the way for other issuers and clients to tap on DDEx’s capabilities to efficiently access capital markets for their funding needs and sets the stage for more STO issuances and listings on DDEx as asset tokenization turns mainstream.

Eng-Kwok Seat Moey, Group Head of Capital Markets at DBS, said: “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.

“We expect asset tokenization to increasingly become more mainstream as more of our clients start to embrace security token issuance as part of their capital fundraising exercise which we believe will boost Singapore’s ambitions to be a digital asset hub in Asia.”

Asset digitalization via the issuance of Security Tokens is an opportunity for corporates to raise funds from Asia-Pacific’s burgeoning private capital markets, which account for nearly one-third of the global private equity market.

Clifford Lee, Global Head of Fixed Income at DBS, said: “While most bond tokenization exercises announced in Asia to date tend to be repackaged forms of a conventional bond issue, the current transaction directly combines existing legal and tax infrastructure requirements with a direct issuance on the digital exchange in smaller lot sizes. This bond token structure was only made possible because of the progressive development of Singapore’s legal and tax infrastructure, which can facilitate more STO issuances to broaden and deepen our capital markets.”

The digital bond will be traded in board lots of SGD 10,000, which is way smaller than the traditionally required multiples of SGD 250,000. This is the t tokenized way.

DDEx was launched in December 2020 as part of an integrated digital asset ecosystem that leverages on blockchain technology to provide clients with a secure and transparent platform to raise funds from the private market.

It also provides an avenue for investors to invest in and trade traditionally illiquid asset classes. Participants can also benefit from comparatively shorter settlement cycles and tap on institutional grade custodial services provided by DBS Bank.