DBS advances asset digitalisation strategy with first Security Token Offering on DBS Digital Exchange
As part of efforts to broaden the suite of products on the DBS Digital Exchange (DDEx), DBS announced today that it has priced an SGD 15 million digital bond, marking DDEx’s first Security Token Offering (STO). The DBS Digital Bond, which comes with a six-month tenor and coupon rate of 0.60% per annum, was done by way of private placement. DBS is the sole bookrunner for the transaction.
This 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 tokenisation turns mainstream.
Asset digitalisation presents a tremendous opportunity for corporate
Eng-Kwok Seat Moey, Group Head of Capital Markets at DBS, noted that asset digitalisation via the issuance of Security Tokens presents a tremendous opportunity for corporates seeking alternative platforms such as DDEx to raise funds from Asia-Pacific’s burgeoning private capital markets. The Asia-Pacific region currently accounts for nearly one-third of the global private equity market, which reached a record USD 4.73 trillion in 2020.
“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 tokenisation, listing, trading, and custody, which in turn opens the door for more STOs on DDEx. 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,” Eng-Kwok said.
The DBS Digital Bond strictly adheres to the current bond legal framework, thereby according investors the same legal certainties and protections over their rights as traditional bonds.
Clifford Lee, Global Head of Fixed Income at DBS said this marks the first of many steps in the journey to evolve the traditional bond issuance into a broader digital ecosystem where more inclusive issuer and investor participation can be rapidly developed.
“While most bond tokenisation 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,” Lee added.
Mr Paul Ho, chief officer at iCompareLoan, said, “the asset digitalisation strategy may provide a new avenue for issuers, investors and dealer banks to interact digitally on a seamless platform. It may also pave The way for more Security Token Offerings.”
To encourage broader participation from investors, the digital bond will be traded in board lots of SGD 10,000. This is a significantly smaller denomination compared to traditional wholesale bonds, which typically require investment and trading amounts in multiples of SGD 250,000. This also highlights DDEx’s ability to offer tokenised assets for trading at much smaller denominations as compared to traditional venues and conventional securities, driving liquidity and lowering barriers to access for investors. With the listing of the Digital Bonds on DDEx, the securities are now available for secondary trading among institutional and accredited investors who are either members or applicable end clients of members of DDEx.
DBS Digital Exchange sees strong traction since launch
Launched in December 2020, DDEx is part of an integrated digital asset ecosystem which 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.
DDEx has enjoyed strong market traction since its launch. Daily trading volumes have increased 10-fold from the initial week of launch, and the exchange currently serves over 120 participants. DBS also holds over SGD 80 million in digital assets in its custodial services.