OSL Digital Securities Ltd., which runs a cryptocurrency exchange in Hong Kong, tested a new potential line of business at the end of July when it distributed a so-called tokenized bond on Ethereum, the world’s largest public blockchain.
The instrument falls under what are known as “tokenized securities” or a digital representation of a traditional security that functions in the same way, except they can be stored, sold, and exchanged on blockchain networks.
In OSL’s bond instrument, each token represents a $10,000 share with a fixed-rate coupon and a bonus coupon tied to Bitcoin price movements, valid for three months. Five companies invested in the bond, including crypto investment firm Animoca Brands.
Executive Director Gary Tiu of BC Technology Group – the parent of OSL, which also has a crypto exchange in Singapore – discussed the bond and the potential for tokenized securities with Forkast, including use-cases and regulatory issues for what are also termed security token offerings, or STOs.
The following interview has been edited for brevity.
Ningwei Qin: Can you walk us through the issuance of the tokenized bond.
Gary Tiu: The project was done as a proof of concept with parties that also shared our belief in the development of the STO space. The actual issuance was done as a private placement in Hong Kong. For the future, we see additional interest coming from corporates and financial institutions wanting to do similar projects with us. But for now that project has been completed and we look forward to actually completing the whole full life cycle of that token.
Qin: How many bonds were sold in the first issuance?
Tiu: As I said, it was done as a proof of concept with a small group of investors, it wasn’t for fundraising as BC Group is already well capitalized. What was important to us was completing each of the issuance steps and the execution. We did the transaction to prove that a private placement of a security token can be done in Hong Kong…
