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Philippines offers first tokenised Treasury bonds in digital technology drive

Philippine pesos: the tokenised bonds issuance comes more than three years after a mobile-phone app was launched to encourage and enable small investors (consumers) to buy Philippines government securities using smartphones | Credit: Angie Reyes (Pexels)

The Philippines government has announced its first offering of tokenised Treasury bonds as part of an ongoing push to use and encourage digital technologies.

The Southeast Asian nation’s move is likely to catch the eye of fintech-interested public authorities worldwide as it provides the latest example of a public authority making use of distributed-ledger technology (DLT) to raise funds.

The Bureau of the Treasury announced the offering, which is aimed at institutional investors, on 16 November, stating that it wanted to ‘provide the proof-of-concept for the wider use of DLT in the government bond market’. It was aiming to raise at least PHP10 billion (about £144m/$180m).

The Department of Finance published an update on 20 November, reporting “strong demand” for the tokenised bonds – digitised forms of traditional physical bonds – during book-building activity, leading to a total awarded amount of PHP15 billion.

The settlement date is scheduled for today (22 November) when the bonds, which have a one-year fixed interest-rate of 6.50 per cent, are due to be issued via a dual registry: the Bureau of the Treasury’s Distributed Ledger Technology (DLT) Registry and the National Registry of Scripless Securities (nRoSS). The latter is the primary registry.

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‘Democratising access to government securities’

The Bureau of the Treasury’s 16 November announcement stated that it was ‘set to offer the Philippines’ first-ever tokenised bonds’ as part of the government’s ‘Government Securities Digitalization Roadmap’.

‘This proof-of-concept will serve as the starting point of the [national government’s] broader agenda of democratising investment through digital technology, significantly reducing settlement risk and friction costs, ultimately leading to a financially inclusive local bond market,’ the Bureau of the Treasury stated.

Finance secretary Benjamin Diokno commended the Bureau of the Treasury for launching the bonds during a speech at an event at the Ayuntamiento de Manila (Manila City Hall) on 20 November. “This strategic move aims to democratise access to government securities by making them more accessible and affordable for every Filipino investor,” Diokno said in his keynote address.

“We are excited for this opportunity to issue our very first tokenised Treasury bonds,” he continued, adding that “the success of this issuance will go a long way towards advancing our efforts in the digitalisation space.”

RELATED ARTICLE ‘Unchained melody: finance ministries explore blockchain’ – write-up of a panel session on blockchain at the Global Government Fintech Lab 2023 (18 May) featuring senior public servants from the finance ministries of three European Union member states (Ireland, Austria and Latvia)

Bonds.PH app helps smaller bond sales

The tokenised bonds issuance comes more than three years after a mobile-phone app was launched to encourage and enable small investors (consumers) to buy Philippines government securities using smartphones.

The Bonds.PH app was launched by the Bureau of the Treasury in partnership with Union Bank of the Philippines (UnionBank) and the Philippine Digital Asset Exchange (PDAX) – a crypto-currency exchange.

The app aimed to make purchasing government bonds more accessible, ‘especially with [Covid-19] quarantine protocols in place worldwide’, the Bureau of the Treasury stated at the time. The app was specifically used for the sale of five-year ‘Progreso’ retail Treasury bonds (at a 2.625% fixed annual interest rate) between 16 July 2020 and 7 August 2020 (this was officially termed the ‘RTB-24’ issuance). ‘Almost 3,000’ transactions were made through the app for amounts of P10,000 and below (the minimum investment was P5,000), with the government raising about P48 million through sales via the app.

Diokno mentioned such consumer-focused innovation in his City Hall speech, commending the Bureau the Treasury for the ‘ease of access and affordability’ of its retail offerings.

In respect of the broader societal goal of boosting financial inclusion, Diokno described progress as “encouraging” in the country, which has a population of about 115 million. Bangko Sentral ng Pilipinas (central bank) has reported that 56 per cent of Filipino adults now have transaction accounts (2021 data) – “a marked improvement from the 29 per cent two years previously”, Diokno said, adding that he was “confident that the Bureau of the Treasury will remain instrumental in helping us achieve our target of ‘banking’ 70 per cent of the adult population.”

RELATED ARTICLE HKMA releases bond tokenisation blueprint to ‘unlock potential’ of DLT – a news story (30 August 2023) on a 24-page report from the Hong Kong Monetary Authority (HKMA) setting out potential next steps to promote the wider use of tokenisation technology for bonds

Blockchain bonds momentum

The World Bank started the ‘blockchain bonds’ ball rolling five years ago with the launch of bond-i – the first bond to be created, allocated, transferred and managed through its life cycle using DLT.

The US-headquartered institution also announced last month that had issued the first digital securities on a new digital financial market infrastructure DLT platform developed by Belgium-based financial services company Euroclear.

The European Investment Bank (EIB) issued its first euro-denominated digital bond using a public blockchain in 2021 and the first euro-denominated ‘digitally native’ bond using private blockchain technology in November 2022. A couple of months later the Luxembourg-headquartered institution launched a digital bond denominated in pound sterling using a combination of private and public blockchains. It issued a ‘climate awareness bond’ denominated in Swedish krona – also a first for the EIB – earlier this year.

Hong Kong authorities announced a successful issuance of tokenised green bonds nine months ago and, in August, published a report setting out potential next steps to promote the wider use of tokenisation technology for bonds. In January the Swiss city of Lugano’s public authority issued a six-year bond of up to CHF 100 million (about £88m/$108m) via blockchain – a move trumpeted as a public sector ‘first’. 

A representative from Latvia’s Ministry of Finance told the audience at the Global Government Fintech Lab in May that the issuance of green bonds using blockchain was an area of governmental interest.

WATCH THIS Blockchain bonds: digital issuance breakthroughs build buzz – a write-up of a Global Government Fintech webinar (23 March 2023) featuring representatives from Lugano (Switzerland), Latvia, Slovenia and Brazil discussing ‘Blockchain-based bonds: what potential for the public sector?’ (the write-up contains a link to a video recording, which is 1hr 23min 29sec)