[ST Frontline] Security Token Bonds Sold Out Immediately──What Future Financial Services Look Like as Imagined by Daiwa Securities | CoinDesk JAPAN

The first security token (ST) bond of the Toyota Group, sold by Daiwa Securities (nicknamed: Toyota Wallet ST Bond), was sold out immediately after its launch on February 20. The total issuance amount was 1 billion yen. It was sold at 100,000 yen per unit with a total of 10,000 units available, but the response exceeded expectations.

For the company, this ST bond is the second case of a public offering following the Daiwa Securities Group corporate bond. It is the first time that the company has sold an ST corporate bond issued by another group, marking a new milestone in the company's business development using blockchain, which has traditionally focused on handling conventional financial products.

We spoke with Takahiro Saito, Head of the Digital Asset Promotion Office in the Corporate Planning Department of Daiwa Securities Group, about the company's purpose in working on ST corporate bonds, collaboration with Toyota, and their outlook on the tokenization of real-world assets (RWA).

Response to Toyota ST Bonds and Differences from Traditional Corporate Bonds

──****What is the response to the Toyota Wallet ST bond? Is the sales performance as expected?

Mr. Saito: Due to the strong name value of Toyota, there were a large number of inquiries from customers. Most branches sold out on the same day, and there were not enough for all those who wanted one.

With a purchase of 1,000,000 yen, a benefit worth 10,000 yen is sometimes granted to the TOYOTA Wallet, leading to many customers purchasing around 1,000,000 yen. Combined with attractive yields and benefits, sales have been smooth, garnering a response that was significantly higher than expected.

──****What is ST corporate bond? What is the difference from traditional corporate bonds?

Mr. Saito: Traditional corporate bonds are referred to as "substitute bonds," and multiple related entities, such as the Securities Depository and Transfer Organization and securities firms, manage and coordinate their respective databases. With ST corporate bonds, this information is centrally managed on the blockchain.

By recording all information on the blockchain, it is expected to enable high transparency and efficient management. However, currently, procedures such as cash purchases, interest payments, and withholding tax are still in place, and the administrative burden remains significant.

In the future, it is expected that by collaborating with digital currencies such as stablecoins (SC), it will be possible to complete processes on the blockchain, including the currency layer, creating substantial cost benefits. The establishment of a subcommittee by Progmat, which is engaged in digital asset issuance infrastructure, indicates that the collaboration between ST and SC is recognized as an important theme for the fiscal year 2025 within the industry.

〈Toyota's Security Token Bond Mechanism〉## Product Design Flexibility and Fan Marketing

──****What benefits are there for investors and issuers?

Mr. Saito: One of the characteristics of ST corporate bonds is the degree of freedom in product design. For example, designs such as weekly interest payments, which were difficult to implement under the existing system, can now become possible. In a system where multiple related organizations, including the existing securities depository and transfer organization, cooperate, all companies will need to make adjustments to the current system to realize new products.

However, if data can be centrally managed on a blockchain platform, it can meet diverse needs through flexible product design. It can be said that not only cost reduction but also the freedom of product design is the significance of ST corporate bonds.

──****Is customer understanding of the new product called ST bonds progressing?

Mr. Saito: While there were some voices expressing concern, I feel that terms like "Real Estate ST" are gradually becoming more widely understood, and customer comprehension is improving.

The recent Toyota Wallet ST Bond is an example of how the feature of offering benefits can also be utilized in fan marketing, which is a characteristic of ST corporate bonds. From the issuer's perspective, unlike traditional corporate bonds that were merely a means of fundraising, ST bonds can also serve as a way to build direct relationships with investors.

Tokenization of Finance and Regulatory Challenges

──In countries like the United States, the tokenization of financial products is advancing; how do you perceive this?

Mr. Saito: Recently, products like tokenized MMFs (Money Market Funds) have been gaining attention overseas, but at this point, I believe they are primarily targeted at cryptocurrency investors.

Related article: What is the new financial product "Tokenized MMF" that stands in the way of stablecoins?

On the other hand, the reason why such products have not yet emerged domestically may be that the needs of the target demographic are still small. However, domestic cryptocurrency investors are beginning to turn their attention to traditional assets such as real estate, stocks, and corporate bonds. In the future, the boundaries between traditional investors and cryptocurrency investors are expected to blur, ultimately leading to a fusion of the two. Furthermore, the utilization of public chains will likely make cross-border investments easier.

──What challenges arise when utilizing a public blockchain?

Mr. Saito: A typical example is DeFi (Decentralized Finance), but it can be difficult to clarify who the "addressee" is to whom legal regulations apply. For instance, when asked if the Ethereum Foundation is the governing body of Ethereum, the reality is that it is not.

In other words, the lack of clarity regarding who to regulate is a major barrier. It is necessary to organize and reduce the points of discussion one by one. If aiming for global trading, the use of public chains is unavoidable, but it is essential to outline the overall picture as a prerequisite.

──What challenges have emerged through the issuance of ST corporate bonds?

Mr. Saito: Everything is a new initiative, and we are currently in the stage of identifying challenges. Among them, the need to organize the handling of personal information in marketing and the permissible scope under legal systems has emerged.

The unique business flow and infrastructure development of ST are also future challenges. Although it can still be said that we are in the demonstration phase, if we can overcome this phase, groundbreaking financial products should be born.

Approach to the Foreign Bond Market and the Cryptocurrency Market

──As a securities company, I would like to hear about your future strategies and outlook.

Mr. Saito: In the future, we plan to advance further initiatives, including the integration of ST corporate bonds and digital currencies. Self-issued projects are also starting to emerge, and it can be said that the real action for ST corporate bonds is just beginning.

Specifically, I would like to consider it from two perspectives. One is the use for marketing aimed at individual investors. For example, self-funding is certainly one method that can be considered, but gathering investors also places a significant burden on the issuer. Therefore, we believe that one direction is to establish a scheme for selling ST corporate bonds by utilizing the customer network of securities companies like ours. It is also possible to attach benefits such as NFTs, points, and exclusive events, and designing products with a narrative aspect becomes a unique strength of ST.

However, the current sales channel primarily focuses on selling to our customers, and there are cases where it does not necessarily align with the fans or users of the issuer. I feel that it is necessary to establish a system that broadly reaches the target audience, including the use of the internet and collaboration with the issuer.

Another aspect is the development aimed at institutional investors. Initially, it will focus on experimental initiatives, but there is great potential in the foreign bond sector. By handling complex structured products that circulate globally on the blockchain, we can simplify data composition while expanding product features. Furthermore, if we also utilize payments through digital currencies, cost reduction effects can be anticipated.

──How do you perceive cryptocurrency investors as customers?

Saito: We are currently exploring possibilities, but there is a chance to sell domestic assets to overseas cryptocurrency investors. However, we cannot say that we fully understand the layer of cryptocurrency investors, so collaboration with overseas partner companies will be key.