State of Tokenization in November 

Welcome to NYALA’s State of Tokenization, our monthly snapshot of the evolving industry and its latest developments.   

In this month’s update, we delve into several significant developments across the globe. The Philippines has announced the sale of $179M in tokenized treasury bonds for the first time in the country’s history, marking a shift towards digital assets. Meanwhile, JPMorgan is elevating B2B payments with the launch of programmable payments through its digital asset and blockchain unit, Onyx. In another first, HSBC has become the world’s first bank to offer tokenized gold, making investing in gold more accessible. Lastly, Japan is set to start digital securities trading from December, further expanding the scope of digital assets.  

 

Philippines Treasury Bonds: The Philippines announced the sale of $179M in tokenized treasury bonds for the first time.  [1]

The Philippines Bureau of the Treasury announced it would offer 10 billion pesos ($179 million) of one-year tokenized treasury bonds for the first time. The bonds will be issued by the state-owned Development Bank of the Philippines and the Land Bank of the Philippines. The Bureau of the Treasury will offer the tokenized bonds to institutional buyers at minimum denominations of 10 million pesos with increments of 1 million pesos. The bonds will be valid for one year and due in November 2024. The final interest rate will be disclosed on the issuance date. This move by the Philippines to issue tokenized bonds over traditional ones comes amid a growing interest of Asian governments in the tokenized bond market. 

 

JPMorgan Elevates B2B Payments with Blockchain [2]

JPMorgan has launched programmable payments through Onyx, the bank’s digital asset and blockchain unit. This feature is designed for blockchain-based accounts on the JPM Coin digital currency system. Programmable payments provide automation based on certain conditions being met, using smart contracts and distributed ledgers. JPMorgan’s clients can use programmable payments to create specific rules for how or when transactions are executed. These rules can accommodate unanticipated events, such as liquidity shortfalls or changes in a supply chain. Users can additionally create flexible rules for funding accounts or triggering payments for equities investing following a margin call. 

The technology, which has its roots in cryptocurrency, could make corporate transactions more flexible. JPM Coin is used to transfer the equivalent of $1 billion daily. Launched in 2019, the system lets large multinationals transfer dollars and euros to and from their various JPMorgan accounts around the world or make payments to other customers of the bank using blockchain rather than traditional payment routes. 

 

HSBC became the first bank in the world to offer tokenized gold. [3]

HSBC has launched a platform that uses distributed ledger technology (DLT) to tokenize the physical gold of institutional clients, stored in its London vault. The platform creates a ‘digital twin’ of an existing physical asset – specifically loco London gold that is custodied in its vault. Each token is equivalent to 0.001 troy ounce of the client’s physical gold holdings. These tokens can be traded between the bank and investors. The system is designed to make investing in gold more accessible. While the service will initially focus on institutional investors, HSBC said in the future, the system will allow for direct investment in physical gold by retail investors if local regulations allow it. 

HSBC is one of the world’s largest custodians of precious metals and one of four clearers on the London gold market, which processes more than $30 billion in gold transactions every day. There are currently around 698,000 gold bars stored in vaults in the Greater London area, valued at around $525 billion, according to the London Bullion Market Association. The integration of blockchain technology promises to help make the process “quicker and less cumbersome” as clients can more easily track the gold they own through the platform, down to the serial number of each bar. As the service expands, HSBC plans to add other precious metals. 

 

Japan to start digital securities trading from December [4]

Osaka Digital Exchange Co. is set to launch Japan’s inaugural trading platform for digital securities in December. These digital securities, in the form of security tokens, will be issued by real estate companies Ichigo Inc. and Kenedix Inc. This move is aimed at individuals seeking alternative assets that could potentially yield higher returns. The introduction of this platform marks a significant step in Japan’s adoption of blockchain technology in the financial sector. 

 

Financial Supervisory Commission of Taiwan awards first securitized token license [5]

Taiwan’s financial supervisor, the Financial Supervisory Commission (FSC), has awarded the country’s first security token offering (STO) license to Cathay Securities. Cathay Securities is permitted to issue $930,000 worth of tokenized green bonds every six months. Cathay received regulatory approval for its “Sunshine Green Yield” STO bonds with a time to maturity of six years, initial annual interest of 3.5%, and an initial principal amount of 30 million New Taiwan dollars ($930,000). Through the token subscriptions, enterprise owners can purchase green electricity on the market for environmental, social and corporate governance initiatives under favorable conditions and receive variable interest rate payments of up to 5.8% per year. 

Trading for the Subshine Green Yield bonds will debut on Dec. 12 on Cathay’s in-house STO exchange platform. Since 2019, the FSC has classified tokenized assets as securities, with an open pathway for financial institutions to apply for licensing. However, issuers must comply with a $930,000 fundraising limit and only conduct a maximum of two STOs per year. The offerings are also only available to enterprises and accredited investors, and in the case of the latter, they can only purchase a maximum of $9,300 STOs. 

 

Onyx by J.P. Morgan and Apollo Explore Tokenization in Investment Portfolios Across Blockchains [6]

J.P. Morgan’s Onyx Digital Assets team and Apollo have collaborated to develop a proof-of-concept (POC) system with the goal of enabling fund managers to tokenize funds onto their chosen blockchain, and to enable wealth managers to purchase and rebalance positions in tokenized assets across multiple, interconnected blockchains. This collaboration is part of Project Guardian, an industry initiative led by the Monetary Authority of Singapore. The POC standardizes processes to settle transactions on interoperable blockchains. Within the POC, Onyx Digital Assets leveraged the Axelar network to enable interoperability with a private and permissioned Provenance Blockchain Zone. Oasis Pro enabled the tokenization of assets, such as Apollo funds, on the Provenance Blockchain Zone. The POC is a working portfolio construction and management solution that demonstrates how a representative portfolio manager could create, deploy, rebalance, and update a large number of portfolios, even when they contain alternative investments. To bring the POC to life, they designed an illustrative portfolio manager and investor application, Crescendo, that showcases how the future of wealth management could look. 

This collaboration is a step forward in showing how tokenized traditional and alternative investments can be automatically managed across multiple systems. The interoperability achieved through Project Guardian is expected to bring significant efficiencies and enable better outcomes for Asset & Wealth Managers and investors through personalized, highly scalable portfolios, regardless of asset class or where those assets are managed and recorded. 

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[1] Philippines to sell $179M in tokenized treasury bonds for the first time (cointelegraph.com)  

[2]JPMorgan (JPM) Launches Programmable Payments Using Blockchain Technology – Bloomberg 

[3] HSBC becomes first bank in the world to offer tokenised gold – The Tokenizer  

[4] Japan to start digital securities trading from December – The Japan Times  

[5] Financial Supervisory Commission of Taiwan awards first securitized token license (cointelegraph.com)  

[6] Onyx by J.P. Morgan and Apollo Explore Tokenization in Investment Portfolios Across Blockchains as Part of Project Guardian | Business Wire  

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