Retail giant introduces digital bond targeted at younger demographic
In a groundbreaking move, Pan Pacific International Holdings (PPIH), a $21 billion Japanese retail powerhouse, is set to launch a digital bond in August. This marks the involvement of a large corporation in the corporate security token market, which has been notably absent until now.
The digital bond issuance takes place in Japan's developed security token environment, where real estate tokenizations are common. PPIH's move is significant as it could pave the way for more non-financial and non-tech companies to explore digital bond offerings.
The digital bond, with a total value of approximately $700,000, offers a 1% return over a one-year period. Investors aged 24 and under will earn additional rewards points through the company's digital payment app, a unique feature in the digital bond market.
SMBC Nikko Securities serves as advisor for the digital bond issuance, but PPIH is proceeding without traditional intermediaries. This approach could signal a shift towards more direct issuances by corporations, bypassing traditional financial institutions.
PPIH's digital bond issuance is a departure from typical digital bond offerings. While financial institutions like KfW and Nomura, and public institutions such as the World Bank and European Investment Bank have issued digital bonds, large non-financial and non-technology sector companies have yet to follow suit, with PPIH being a notable exception.
However, entities like Türkiye İş Bankası, Luxembourg, and several examples of technology linked companies have issued digital bonds. Türkiye İş Bankası, for instance, issued a digital bond worth $100 million using Digital Financial Market Infrastructure (D-FMI) and DLT technology, marking a pioneering move in the use of blockchain technology for capital market transactions in Turkey and developing markets.
As the technology and regulatory frameworks continue to evolve, it is likely that more non-financial and non-tech companies will explore issuing digital bonds. Platforms like Alterna, operated by Mitsui & Co Digital Asset Management, target retail investors directly, similar to PPIH's approach. Mitsui & Co has previously partnered with retailers to promote security token issuances.
The involvement of large corporations like PPIH in the corporate security token market could lead to broader adoption of corporate security tokens. PPIH plans to use the bond's proceeds for youth empowerment programs, aligning with the youth focus of the digital bond.
The minimum investment for the digital bond is 100,000 yen ($69), making it accessible to a wide range of investors. PPIH is conducting a month-long draw system for the digital bond, suggesting they anticipate demand exceeding supply.
In conclusion, PPIH's digital bond issuance is a significant step forward in the corporate security token market. As more companies explore this innovative financial technology, we can expect to see a growing number of digital bond offerings from non-financial and non-tech sector companies.
[1] Source: Coindesk, Luxembourg Issues Digital Treasury Certificates on HSBC's Orion Platform (2020) [2] Source: Cointelegraph, Türkiye İş Bankası Issues $100 Million Digital Bond Using DLT Technology (2020) [3] Source: Finextra, Tokenised Bonds in Europe: A Growing Trend (2021)
- PPIH's digital bond issuance, with a minimum investment of 100,000 yen, could attract a wide range of retail investors, as seen in platforms like Alterna, operated by Mitsui & Co Digital Asset Management.
- As more companies, like PPIH, embrace technology for finance and asset management, there is potential for a broader adoption of corporate security tokens, thus growing the corporate security token market.
- As the technology and regulatory frameworks evolve, we may witness non-financial and non-tech companies following PPIH's trailblazing move into the digital bond market, similar to Türkiye İş Bankası's pioneering use of blockchain technology for capital market transactions.
