In June this year, United Overseas Bank (UOB) announced it had issued a digital bond as part of a pilot, to support Marketnode, a joint venture between Singapore Exchange and Temasek.
Marketnode is a digital asset venture focused on capital markets workflows through smart contracts, ledger and tokenisation technologies. The platform uses distributed ledger technology (DLT) to connect various parties involved in the transaction — from issuers to investors — and to tokenise the capital security, so that smart contracts can be created and conducted for greater efficiency.
What this means is that a digital bond cuts out all the documentation, emails and heaps of exchanges between the issuer and the DCM (debt capital market) investment bankers, settlement banks and book-runners. When a digital bond is issued, it creates smart contracts automatically. As a digital bond, a traditional bond certificate won’t be issued.
Asset digitalisation provides the SGX with the opportunity to, through DLT and smart contracts, enable financial market infrastructure for an end-to-end issuance, depository and asset servicing platform for Asian bonds, according to the Marketnode website.
The UOB security is a perpetual, non-call seven-year security that qualifies as additional tier 1 (ATI) capital, using the Singapore Overnight Rate Average Overnight Indexed Swap (SORA-OIS) rate as a reference.
