Japan: SBI-backed ODX to list digital bonds following release of START

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Barely one year after Osaka Digital Exchange (ODX) rolled out a digital securities platform for trading security tokens, several reports have emerged that the exchange is set to begin listing digital bonds.

The SBI-backed digital exchange confirmed that ODX’s START platform will host digital bonds that meet the listing criteria. Since START’s launch in late 2023, real estate security tokens have been the most common issuances on the platform, given their innate popularity in Japan.

ODX will open its doors to three digital bonds in the coming months but specifics were not disclosed to the public. The successes of digital bonds in Europe may have played a role in ODX’s decision to expand the scope of its offering, with its backers reportedly giving the nod to the move.

SBI, the largest shareholder in the exchange, has approved the decision to list digital bonds while Nomura (NASDAQ: NRSCF), SMBC, and Daiwa Securities (NASDAQ: DSECF) have also given the green light to the move.

Armed with the raft of approvals, ODX appears set to begin listing digital bonds that meet its stringent requirements. The exchange will look for bonds that are regulatory compliant and meet relevant Know Your Customer (KYC) and anti-money laundering (AML) rules.

The incoming digital bonds will be approved for secondary trading if they possess smart contract functionality to automate redemption processes and highly secure systems. Other perks to speed up the listing process include interoperability, high liquidity levels, and proper risk management.

It appears that the exchange will stick to its policy of discounting seller fees to improve adoption, but it remains unclear whether the firm will bring back zero fees for users.

“We will dedicate our best efforts to collaborate with our participants and supporters so that the secondary market “START” can contribute to the further development of the security tokens market,” ODX said in December.

The tango with digitization

Security tokens have garnered significant interest from investors in Japan following fresh regulatory clarity from financial authorities back in 2023. Several financial institutions in Japan have pitched their tent with the asset class, rolling out their security token platforms in line with extant regulations.

Firms keen on experimenting with digital bonds in Japan must contend with high compliance costs and the hassle of integrating with the local financial system. However, partnering with local firms and rolling out pilot programs may offer a veritable solution to these challenges.

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