On Friday Nomura Research Institute (NRI) issued its latest digital bond on BOOSTRY‘s blockchain platform that it co-founded. While digital securities are quite popular in Japan, most of them are for tokenized real estate rather than digital bonds. One of the objectives of the latest issuance was to explore improved settlement, particularly delivery versus payment (DvP). The settlement of the Yen 3 billion ($20m) bond was executed with conventional bank money on a T+1 basis, but using DvP. Separately, there was a simulation using tokenized deposits and DCJPY.
Most conventional wholesale bonds in Japan settle via the Japan Securities Depository Center (JSDAC) which supports delivery versus payment. Given digital bonds don’t use JSDAC, to date Japanese issuances have not settled using delivery versus payment, and are therefore viewed as having greater settlement risk compared to conventional bonds.
Hence, the digital bond was issued and settled against conventional deposits in association with SMBC bank. This used T+1 DVP, which is three days faster than JSDAC for new issuances.
Tokenized deposits for digital bond settlement
Separately, the tokenized deposit proof of concept involved simulating the settlement using the DCJPY platform for digital currency. DCJPY is already in production and has many banks involved in working groups. But we believe that only one bank has gone live so far – GMO Aozora Net Bank – using tokenized deposits to pay for something similar to renewable energy certificates.
“In this project, the settlement risks for digital bonds were successfully reduced, which represents a major breakthrough,” said a Nomura Securities spokesperson. “The project was also an opportunity to deepen our understanding of digital currencies as a new settlement tool that will enhance user convenience.”
While connectivity between BOOSTRY’s ‘iBet for Fin’ platform and the DCJPY platform is being considered, there are a long list of issues that have to be resolved first. Some of the biggest ones are whether banks can justify the investment, ensuring regulatory clarity, and exploring integration issues.
These are common challenges. Yet stablecoins face far fewer adoption hurdles, and hence are likely to penetrate mainstream payments before many banks finally justify the need to sufficiently lean into tokenization for payments.
Ledger Insights Research has published a report on bank-issued stablecoins and tokenized deposits featuring more than 70 projects. Find out more here.
Meanwhile, today BOOSTRY announced its platform was used again for a tokenized real estate issuance. We’ve previously written about Mitsui & Co Digital Asset Management (Mitsui) which has launched the Alterna platform for selling real estate security tokens direct to the public. This is the tenth Alterna issuance, this time backed by four apartment buildings used by Gakugei University. Trust services were provided by Shinsei Trust, its first involvement with a digital security. SBI Shinsei Bank provided a non-recourse loan to the security token project.
