Today, HSBC Singapore announced a partnership with Singapore Exchange (SGX) and state-owned Temasek for a blockchain trial for servicing fixed income securities. The project will focus on end-to-end digitalization of the Asian bond markets.
According to the Asian Development Bank, the region’s local currency bond market hit US$15.3 trillion at the end of June 2019. Asia’s fixed income markets are seeing continuous growth due to development in the region. But the bond issuance and servicing processes have not been updated at the same pace.
To address this, HSBC aims to build a single platform for information exchange between stakeholders and tracking a bond through its lifecycle. The trial will experiment with tokenized securities and smart contracts over blockchain to streamline workflows and reduce costs for issuers, investors, bond arrangers and custodians.
“Only by collaborating with market participants will we fully understand its actual viability; by partnering with SGX and Temasek, we hope to explore whether digital assets could become a reality,” said Tony Cripps, CEO at HSBC Singapore.
SGX is one of the largest bond listing venues for bond issuers. Also, HSBC’s Asian Local Bond Index is the largest in the region, along with JP Morgan’s JACI Index.
“Having HSBC and Temasek on board will enable us to evaluate holistically whether smart contracts and DLT can solve some of the long-standing challenges in the fixed income issuance ecosystem,” said Lee Beng Hong, Head of Fixed Income, Currencies & Commodities at SGX.
This is not the only initiative in Asia to bring fixed-income instruments onto blockchain. A few months ago, Japan’s Nomura Holdings and Nomura Research Institute formed a joint venture firm to build a blockchain platform for securities exchange, with a focus on bonds.
Last week, Japan’s MUFG formed the Security Token Research Consortium with Mitsubishi, NTT, Accenture, KPMG and startup Securitize to explore blockchain for security tokens starting with bonds.
The Commonwealth Bank of Australia and World Bank are collaborating for trading a purely blockchain-based bond called bond-i.
Last year, Russian telecom firm MTS issued a bond on the National Settlement Depository’s blockchain with support from Sberbank. Going further back in time, two years ago the National Bank of Canada issued a Certificate of Deposit with JP Morgan as the sole dealer. And in Europe, BBVA is perhaps the most active in bonds and debt on blockchain.