Joining an Emerging Asian Trend
The departure from conventional annual bond issuance to tokenized results from the desire to keep up with emerging Asian trends. The Philippines is not the first Asian country to issue tokenized bonds. It was previously done in both Singapore and Hong Kong.
However, the Philippines have limited previous experience with blockchain usage for government bonds after they used a blockchain solution in 2020 as part of an app to facilitate the purchase of retail treasury bonds (RTB) for customers.
Historically, governments have always used the bond market as a funding source. It has provided the means to fund various infrastructure or social projects and plug gaps in the budget while investors receive a safe and steady income. However, it was not a perfect process, often hampered by high transaction fees and prolonged settlement periods, discouraging many investors from entering the bond market.
Revolutionizing the Bond Market
The emergence of blockchain technology can revitalize the bond market through tokenized bonds, a digital representation of a bond asset on a blockchain network. These digital versions of government-issued securities can be traded effectively and transparently, plus they are liquid. Liquidity was often not an option for conventional bonds, sold in large denominations and at specific exchanges.
On the other hand, tokenized bonds can be purchased on blockchain-based platforms, accessible to a large pool of investors, benefiting from enhanced transparency without intermediaries charging extra fees. Security is another important component of tokenized bonds, with blockchain encryption preventing fraudulent activity and bolstering investor confidence.
It’s logical to expect other countries to follow the Philippines' example and make tokenized bonds a staple offering.