December 9, 2020 - Union Bank of The Philippines (UnionBank) has teamed up with British multinational banking and financial services giant Standard Chartered Bank (SCB) on a new project for the issuance of a retail bond on a digital platform leveraging blockchain technology for bond tokenization.
The 3 and 5.25-year dual tranche issuance totalling PHP 9 billion by UnionBank was successfully mirrored on the platform co-created by UnionBank and SC Ventures, the innovation and ventures arm of Standard Chartered. Orders received were tokenized, and to stay within existing retail bond guidelines, tokens issued mirrored the traditional transaction but were not allocated directly to investors. SC Ventures built the bond tokenisation platform .
"The marriage of a digital order taking platform and backend infrastructure driven by tokens is the future of retail bonds. We are keen to see the day when investors can buy and sell bonds, even on the secondary markets, at a click of a button on their phones," said Jose Emmanuel Hilado - UnionBank Executive Vice President and Chief Finance Officer. “This proof of concept begins the journey of the democratisation of bonds as an investment destination which supports the UN Sustainable Development Goals of the United Nations.”
"We co-created the solution with UnionBank with the aim of providing retail investors with a trusted and transparent platform to gain direct access to bonds. Today marks a milestone as we shape the retail bond infrastructure of tomorrow," commented Alex Manson of SC Ventures.
As per the venture partners, the upcoming eventual success of this proof of concept will open up numerous possibilities for solving liquidity and transparency in the retail bond markets.
Usage of the new portal promises that UnionBank's clients will find a fully digital end-to-end service, starting from account verification, client suitability assessment, filling up the application to purchase form, up to allocation to the investor. The platform will also keep the purchase of bonds entirely paperless and more efficient as it will cut the processing time for customers from a couple of days down to a few minutes.
"We are pleased to see innovation in fintech being driven by incumbent players in the industry and look forward to seeing further enhancements in the region. This aligns well with the government's advocacy to accelerate digital delivery and serve wide market segments," commented Ephyro Luis Amatong from Securities and Exchange Commission.He also added that the results of the parallel run could provide a measure of the efficiency and effectiveness of tokenization and the use of distributed ledger technology (DLT). Still, he clarified that such a program would need approval by the Commission before its full implementation.
The latest UnionBank blockchain project follows another initiative on blockchain-enabled bond issuances – the launch of the so-called BONDS.PH. The platform for retail treasury bonds launched earlier in 2020 in partnership with the Philippine Digital Asset Exchange (PDAX) and the Philippine Bureau of the Treasury. It issued Philippines' RTB-24 or Progreso Bonds and is now one of the channels to purchase the second offering of Premyo Bonds until December 11, 2020.
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