Philippines sells US$270 million of maiden tokenised bonds

THE Philippines sold tokenised Treasury bonds for the first time on Monday (Nov 20) in what might be a prelude to a wider use of digital ledger technology in the country’s government debt market.

The Bureau of the Treasury sold 15 billion pesos (S$362.7 million) of the debt that will fall due on November 2024, according to a statement. The bonds, offered to institutional investors, were priced at a coupon of 6.5% per year. Bids totalled 31.426 billion pesos, more than triple the initial offer size of 10 billion pesos.

The bonds will be issued in the form of digital tokens and will be maintained in the Distributed Ledger Technology Registry, a blockchain-based registry owned by the Bureau of the Treasury. The bureau will implement a dual registry structure, with the DLT Registry running in parallel with the National Registry of Scripless Securities or NRoSS. 

“With more and more Filipinos embracing e-wallets, it is time to embrace tokenisation in our issuances,” Finance Secretary Benjamin Diokno said in a speech at a treasury event. While the tokenised bonds were sold to institutional investors, Bangko Sentral ng Pilipinas Governor Eli Remolona said in the statement that officials hope the bonds will be offered to retail buyers “over time.”

The maiden issuance of tokenised Treasury bonds aims to provide the “proof of concept” for the wider use of DLT in the government bond market, the Treasury said, adding the initiative is part of its government securities digitalisation plan. It expects blockchain technology to significantly reduce settlement risk and friction costs.

Tokenisation remains a nascent sector but is drawing the interest of a growing number of governments and companies. In February, for instance, Hong Kong sold HK$800 million ($103 million) of inaugural digital green bonds using Goldman Sachs’ GS DAP platform, touting the step as the first tokenised green bond issued by a government globally.

Citigroup estimates the tokenisation market could swell to US$5 trillion by 2030, spanning assets like bonds, property and private equity. One claimed benefit is that tokenisation makes illiquid assets easier to trade, deepening the pool of buyers and improving price discovery.

The first tokenised issue out of the Philippines, however, will not be tradable, officials said. 

Development Bank of the Philippines and Land Bank of the Philippines, both state-owned, were the issue managers for the South-east Asian nation’s first tokenized bond.

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Philippine Digital Asset Exchange, a virtual asset service provider licensed and regulated by the country’s central bank, is the technology provider for the digital bond registry. BLOOMBERG