Sumitomo Mitsui Trust Bank, one of Japan’s largest banks, has completed its first asset-backed security token issuance pilot.
The method of raising funds through the issuance of security tokens is called a security token offering (STO). Investors are issued a digital token that represents a physical investment to be stored on a blockchain.
Security tokens became famous in 2018, following the initial coin offering (ICO) boom. Unlike ICOs, STOs were meant to represent a security regulated and traded in accordance with securities regulation. Despite the hype, STOs failed to take off for the most part, particularly in parts of Asia. In fact, in 2018, Beijing’s financial authority warned that STOs were illegal.
The security tokens issued in Japan’s effort have a short-term rating of "a-1" given by the Japan’s leading credit rating service, Rating and Investment Information, and will be launched within the month, according to the announcement. The security tokens are also compliant with Japan’s Financial Instruments and Exchange Act (FIEA), according to a statement from Securitize Japan.
For the pilot, the bank created beneficiary certificates representing the asset-backed securities and tokenized them on the Securitize platform, the statement said.
Another influential Japanese financial institution, SBI Holdings, announced three days ago it had also completed registration requirements to handle STOs. Additionally, Nomura Holdings, Mizuho Financial, Mitsubishi UFJ Financial and others have been researching and developing digital securities backed by assets such as bonds, stocks and real estate, according to CoinDesk Japan.
Sumitomo Mitsui Trust will continue to research the issuance and management of security tokens for the STO market, according to the announcement. The bank will also be looking into security tokens as a way to connect investors with long-term social impact objectives like the United Nations Sustainable Development Goals (SDG) and Environment, Society and Corporate Governance (ESG).
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.