Treasury may sell tokenized bonds to retail investors
At A Glance
- The government plans to make tokenized bonds available to retail investors to include more people in finance and improve market activity.<br>Erwin Sta. Ana, Deputy Treasurer of the Philippines, said that the issuance of tokenized treasury bonds (TTBs) is part of the government's plan to digitize securities, aiming to promote financial inclusion and improve market liquidity.<br>TTBs were exclusively available to institutional investors due to a minimum investment requirement of P10 million.<br>The Treasury's sole investment choices for small investors are its retail treasury bond and retail dollar bonds, which necessitate minimum investments of P3,000 and $300, respectively.<br>The government recently issued its inaugural TTBs, granting P15 billion at a 6.5 percent annual coupon rate. Bids exceeded the initial offer size of P10 billion, totaling P31.426 billion, more than triple the original amount.<br>The treasury official acknowledged that realizing the vision of making tokenized bonds available to retail investors will require the government to gradually develop the infrastructure required to make it a reality.
The Bureau of the Treasury Bureau said the government plans to enable retail investors to access tokenized bonds in the future to advance financial inclusion and strengthen market liquidity.
Deputy Treasurer of the Philippines Erwin D. Sta. Ana said the issuance of tokenized treasury bonds (TTBs) is a part of the government's initiative to digitize securities that enables more seamless trading and settlement for government IOUs.
“In the future, we envision these (TTBs) to be a security that our retail investors can acquire in denominations that are even lower than our existing retail products,” Sta. Ana said in a statement.
TTBs were exclusively available to institutional investors due to a minimum investment requirement of P10 million.
Presently, the Treasury bureau only offers small investors the opportunity to invest in its retail treasury bond and retail dollar bonds, with minimum investment requirements of P5,000 and $200, respectively.
Last week, the government awarded P15 billion of the first one-year TTBs at a 6.5 percent coupon rate. Bids reached P31.426 billion, surpassing the initial offer size of P10 billion by more than threefold.
A tokenized bond is a digitized form of a traditional bond. Rather than being represented by a physical document, it is stored as a digital token on a blockchain computer system.
This digital format simplifies the process of buying, selling, and monitoring the bond, as all transactions are conducted electronically.
“We envision market participants to be able to trade these securities among themselves and to be able to settle their transactions in real-time,” Sta. Ana said.
However, the treasury official admitted that realizing this vision will necessitate the government to gradually develop the infrastructure required to make it a reality.
“Today, we take the first step in this journey,” he added.
The treasury tapped the services of Landbank of the Philippines, the Development Bank of the Philippines (DBP), and the Philippine cryptocurrency exchange PDAX for the issuance of its first TTBs.
“Offering these bonds to institutional investors serves as the first step to a more seamless trading and settlement experience for government securities in the Philippine financial markets,” Nichel Gaba, PDAX chief executive officer said.
“Through greater use of blockchain technology, many risks such can be eliminated, deepening liquidity in the capital markets,” he added.
While only institutional buyers can access TTBs, retail investors can use the PDAX app to access other treasury bills without needing to visit a financial institution.
With investments starting at P500, retail investors can access low-risk instruments backed by the Philippine government with a yield of around 6.2 percent and a maturity of 91 days.