June 16, 2023
By Joe Pan
In recent weeks, the digital asset industry has witnessed intriguing developments, including increased regulatory scrutiny by US authorities targeting prominent crypto exchanges. In contrast, China has taken a significant leap forward in embracing innovative financial solutions.
BOCI, a prominent Chinese bank, has made headlines by officially introducing the country’s first tokenized security in collaboration with UBS, the Swiss investment bank. This tokenized security, developed on the Ethereum blockchain, marks a crucial milestone in China’s digital asset landscape.
Private placement is a widely adopted method by major banks to raise capital from institutional and high-net-worth clients. Traditionally, private placements involve the issuance of securities that are not publicly traded. However, with the emergence of blockchain technology, tokenization has gained traction as a more efficient and transparent approach for private placement offerings.
By tokenizing securities, BOCI and UBS are leveraging the benefits of blockchain technology to enhance the issuance, trading, and management of private placement instruments. Tokenization involves representing ownership of an asset, such as a security, as a digital token on a blockchain. This enables increased liquidity, fractional ownership, and streamlined settlement processes.
The collaboration between BOCI and UBS demonstrates the convergence of traditional financial institutions with emerging technologies. UBS, a frontrunner in the adoption of blockchain technology, previously issued a USD 50 million tokenized fixed-rate note in December 2022, leveraging English and Swiss law and a permissioned blockchain. This experience served as a catalyst for the development of tokenized securities in the Asian Pacific region, targeting Chinese clients.
BOCI’s successful issuance of CNH 200 million fully digital structured notes is a significant achievement, positioning the bank as the first Chinese financial institution to introduce a tokenized security for private placement in Hong Kong. This ground-breaking initiative showcases BOCI’s commitment to embracing digital finance and driving technological innovation within the financial industry.
The utilization of blockchain technology for tokenized securities offers numerous advantages. It enhances transparency, reduces transaction costs, enables real-time settlement, and provides increased accessibility to a wider range of investors. Moreover, the use of smart contracts on the blockchain streamlines compliance and regulatory requirements, ensuring that transactions adhere to applicable laws.
UBS, through its UBS Tokenize platform, continues to expand its tokenization services across various financial products, including structured products, fixed income, and repo financing. This comprehensive approach demonstrates UBS’s dedication to meeting the increasing demand from clients in the Asia Pacific region for fully regulated digital asset products.
Ms. Ying Wang, Deputy CEO of BOCI, expressed enthusiasm about the collaboration, emphasizing the importance of simplifying digital asset markets and products. She highlighted the evolution of Hong Kong’s digital economy and BOCI’s commitment to promoting the digital transformation and innovative development of the financial industry in the region.
The issuance of China’s first tokenized security not only showcases the remarkable progress of Hong Kong’s digital economy but also positions BOCI as a trailblazer in technology finance and digital finance. This milestone paves the way for the wider adoption of tokenized securities in private placement offerings, reinforcing Hong Kong’s position as a hub for cutting-edge financial solutions.
About the author
Joe Pan is producer and editor at NFTMetta.com.