OCBC launches tokenised bonds customised to client’s desired tenor and yield

SINGAPORE - OCBC Bank has launched tokenised bonds that are structured based on the client’s desired tenor and yield, becoming the first bank in Singapore to offer the option as the Republic pushes for asset tokenisation in financial services.

These tokenised bonds are targeted at corporate accredited investors, or companies that have net assets worth over $10 million.

Tokenisation allows fractional ownership where the corporate accredited investor can subscribe to tokens at $1,000 denominations, unlike a corporate bond which usually requires the investor to subscribe to the full amount of the bond, typically at a high minimum of $250,000.

Asset tokenisation in financial services refers to the process of digitally representing real and physical assets such as bonds and equities on the blockchain.

Investors can then avoid concentration risk and build more diversified portfolios, OCBC said in a statement on Jan 6.

Mr Kenneth Lai, head of global markets at OCBC, said: “As an industry, we have made significant strides in understanding and recognising the vast potential of tokenised assets.”

He added: “This innovation provides flexible and liquid investment alternatives, bringing tangible benefits to our customers. Leveraging our asset tokenisation capabilities, we will progressively expand our offerings to include other types of tokenised assets.”

Mr Michael Makdad, an analyst at financial services firm Morningstar, said: “The main customer need this product serves is the ability to size flexibly. Bond investors who want a certain size exposure to a particular credit or tenor as part of their overall portfolio management needs can more easily adjust the investment size.”

Mr Pramod Shenoi, head of Asia-Pacific research at CreditSights, said: “Investors can then achieve better investment diversification with the same amount of money – for example, they can buy five different bonds at $40,000 each, rather than spend $200,000 on a single bond.”

At a fireside chat during the Singapore FinTech Festival 2024, Monetary Authority of Singapore (MAS) managing director Chia Der Jiun said tokenisation could cut costs and also increase the speed of settlements. Traditional bond transactions usually take five days for settlement.

OCBC said it minted a tokenised bond with a tenor of less than a year for a mid-sized manufacturing company in November 2024, with the transaction being settled within the same business day.

The MAS in November 2024 announced plans to advance tokenisation in financial services, including building an ecosystem of market infrastructures and fostering industry frameworks to implement tokenised assets.

This is not the first time OCBC has used blockchain technology for commercial purposes.

The Singapore bank partnered the Land Transport Authority in 2024 to pilot a blockchain-based conditional payment solution for construction projects.

The solution allows advance payments to be automatically disbursed to main contractors once predetermined conditions are met, helping them to defray heavy upfront capital outlays at the start of their construction project.

Local peers DBS Bank and UOB have also made headway in tokenised bonds and other assets. DBS in May 2021 issued a tokenised bond as its digital exchange’s first security token offering, while UOB in June 2021 piloted a digital bond issuance on Marketnode’s digital asset issuance and depository platform.

• Sheila Chiang is a business correspondent at The Straits Times.