OCBC Bank, based in Singapore, is ushering in a new era for corporate investors with the introduction of bespoke tokenised bonds, enhancing the landscape for corporate accredited investors (corporate AIs). This move aims to commercialise and expand the use of tokenised assets in the financial sector.
The tokenised bonds are structured to meet the specific requirements of clients, taking into account their desired investment tenor and yield. Once tailored, the bonds are minted and transferred to clients' wallets on OCBC's asset tokenisation platform. This initiative marks the second commercial application of the bank's blockchain infrastructure, which was established in 2022. The first application involved a collaboration with the Land Transport Authority (LTA) to pilot a blockchain-based conditional payment solution for construction projects scheduled for implementation in 2024.
Traditionally, corporate bonds require a high minimum transaction size, typically S$250,000, potentially leading to concentration risk for investors. The innovation of tokenisation mitigates this issue by enabling fractional ownership; corporate AI clients can now subscribe to tokens at denominations as low as S$1,000. This new approach fosters the ability to build more diversified portfolios, allowing clients the flexibility to liquidate investments also in S$1,000 increments to better manage their cash flow requirements.
OCBC’s asset tokenisation platform plays a pivotal role in this revolution, streamlining the entire lifecycle of tokenised assets from creation and minting, through to ownership transfers, custody, and eventual redemption via token burning. The bank plans to progressively extend this capability beyond fixed income assets, looking to include a broader array of offerings such as structured products and funds.
Kenneth Lai, OCBC's head of global markets, spoke to The Fintech Times about the bank's advancements in this arena, stating, “As an industry, we have made significant strides in understanding and recognising the vast potential of tokenised assets. As we shift our focus towards commercialisation, we are proud to have developed bespoke tokenised bonds via our asset tokenisation platform. This innovation provides flexible and liquid investment alternatives, bringing tangible benefits to our customers."
In a notable success story, OCBC completed its first transaction for a mid-sized manufacturing client in November 2024, minting a tokenised bond with a duration of less than one year. This initiative allowed the client to pivot from traditional fixed deposits and diversify their investment strategy. With a high-interest rate environment influencing many corporate AIs to favour fixed deposits, tokenised bonds are being viewed as a viable alternative, especially as interest rates begin to decline.
Remarkably, the transaction was finalised within the same business day, facilitating a swift process from the debiting of the client’s bank account to the transfer of digital tokens from OCBC to the client’s custodised wallet. This contrasts sharply with traditional bond transactions, which typically require up to five days for settlement. This transaction marked the client’s first experience with tokenised assets, highlighting the potential for broader adoption in the future.
Source: Noah Wire Services