{"id":384,"date":"2024-02-27T15:11:09","date_gmt":"2024-02-27T13:11:09","guid":{"rendered":"https:\/\/www.bitbond.com\/?p=384"},"modified":"2024-02-27T15:11:54","modified_gmt":"2024-02-27T13:11:54","slug":"case-study-securities-tokenization-platform","status":"publish","type":"post","link":"https:\/\/www.bitbond.com\/resources\/case-study-securities-tokenization-platform\/","title":{"rendered":"Securities Tokenization Platform &#8211; Case Study"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div>\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\" id=\"rank-math-toc\"><h2>Table of Contents<\/h2><nav><ul><li ><a href=\"#background\">Background<\/a><\/li><li ><a href=\"#problem\">Problem<\/a><\/li><li ><a href=\"#approach\">Approach<\/a><\/li><li ><a href=\"#conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<p>On December 7th, 2020 the innovation and venture arm of Standard Chartered Bank, SC Ventures, together with UnionBank of the Philippines,&nbsp;<a href=\"https:\/\/av.sc.com\/corp-en\/nr\/ph\/content\/docs\/SCB_PR-UnionBank-Standard-Chartered-pioneer-blockchain-enabled-bond-issuance-in-the-Philippines-.pdf\" target=\"_blank\" rel=\"noopener\">successfully completed a proof of concept<\/a>&nbsp;issuance of a tokenized bond. It consisted of mirroring a&nbsp; traditional issuance of a 3 years and 5.25 years dual tranche retail bond totaling PHP 9 billion (~150M EUR) on a platform dedicated to securities tokenization, leveraging blockchain technology. This platform was developed in cooperation between Bitbond, Standard Chartered Bank (SCB) &amp; UnionBank of the Philippines (UBP).&nbsp;<\/p>\n\n\n\n<p>Bitbond provided its securities tokenization technology to SCB enabling the issuance of a retail bond on a digital platform using Bitbond\u2019s white-label SaaS solution. Thus, allowing the tokenization of incoming orders through the use of blockchain technology.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tokentool.bitbond.com\/createtokensale\/ethereum\/?utm_source=bitbond&amp;utm_medium=button&amp;utm_term=securities_tokenization_platform&amp;utm_content=&amp;utm_campaign=blog_button_top\" target=\"_blank\" rel=\"noreferrer noopener\">Go to Token Generator<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"background\" style=\"font-style:normal;font-weight:400\">Background<\/h2>\n\n\n\n<p>In a transaction, trust is the baseline component ensuring its successful execution: both Buyer and Seller must fulfill their duty of delivering the consideration and asset respectively. Today\u2019s financial infrastructure is based on licensed institutions that play an indispensable role in providing that trust (e.g. Registrar\/CSD, Custodians, Banks). In addition, Buyer &amp; Seller require many other services to perform administrative functions related to that transaction (e.g. Paying Agent, Market Maker, Trustee). These intermediaries no doubtedly provide an immense value to financial and capital markets, but that comes (quite literally) at a cost.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"problem\" style=\"font-style:normal;font-weight:400\">Problem<\/h2>\n\n\n\n<p>The processes that these intermediaries undertake in order to ensure the delivery of trust is manual, paper-based, mostly expensive, and inefficient. Consequently, it works well only when there are a few market participants that operate above a certain threshold, which would mainly constitute a handful of institutional investors.&nbsp;&nbsp;<br><br>This complex system does not cater to the retail market from different parts of the world, where there are many participants performing transactions with a much smaller threshold at a higher frequency. As a result, retail securities investing is even more complex, costly and lacks transparency. The following points can become real nuisances with transactions:<\/p>\n\n\n\n<ul>\n<li>The processes are time consuming: several months are required from subscription to an allocation of investments<\/li>\n\n\n\n<li>The work is handled manually, processes are paper based &amp; susceptible to operational errors<\/li>\n\n\n\n<li>There is no backup or info through instrument life cycle<\/li>\n\n\n\n<li>No secondary liquidity is available&nbsp;<\/li>\n\n\n\n<li>The process is non-transparent to retail investors<\/li>\n<\/ul>\n\n\n\n<p>Pain-points to be addressed:&nbsp;<\/p>\n\n\n\n<ul>\n<li>Order-taking and allocation is manual, time consuming for investors\/selling agent banks and susceptible to human error<\/li>\n\n\n\n<li>Reconciliation (ATP vs Sales Report) is manual and lasts several days. Registry confirmation is given after reconciliation<\/li>\n\n\n\n<li>Issuer decides on allocation and sends report to Registrar for transfer of ownership<\/li>\n\n\n\n<li>Secondary market is almost non-existent for the retail market. Execution is time consuming<\/li>\n\n\n\n<li>Inefficient communication between issuer and investor, which is conducted via intermediaries<\/li>\n\n\n\n<li>Investor servicing is slow via manual paper-based systems involving intermediaries administrative processes such as changing account number or confirming ownership of a security<\/li>\n<\/ul>\n\n\n\n<p>SCB &amp; UBP have therefore taken the initiative to utilize new technology by developing a platform which has for purpose to make these processes more efficient. Many other similar institutions are resorting to similar technology to have them implemented in their internal operations for better improvement of their systems.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"approach\" style=\"font-style:normal;font-weight:400\">Approach<\/h2>\n\n\n\n<p>The undertaken approach to cater to these pain points was  to utilize <a href=\"https:\/\/www.bitbond.com\/resources\/blockchain-as-a-database\/\" target=\"_blank\" data-type=\"post\" data-id=\"810\" rel=\"noreferrer noopener\">Blockchain \/ Distributed Ledger Technology (DLT)<\/a>. Due to its \u201cTrustless\u201d nature where transacting between two or more parties is made more efficient and transparent, issuing and servicing securities on DLT through on-chain securities tokenization is improved thanks to automation and user-friendly workflow.&nbsp;<\/p>\n\n\n\n<p>The process of tokenization de-materializes securities, meaning that the proof of ownership is now represented by a digital token instead of a paper certificate. This enables issuers to reach a wider group of&nbsp; investors and access to global audiences becomes significantly cheaper with securities tokenization. Securities tokenization enables significantly lower transaction fees, it&#8217;s capable to carry out a direct relationship to global investors&nbsp; without the need for third parties.<\/p>\n\n\n\n<p>In the field of capital markets, securities tokenization offers substantial efficiency gains in the issuance process: <\/p>\n\n\n\n<ol>\n<li>Digital end-to-end investment flow <\/li>\n\n\n\n<li>Fewer intermediaries <\/li>\n\n\n\n<li>Lower costs <\/li>\n\n\n\n<li>Reduced complexities <\/li>\n\n\n\n<li>Global transferability and instant settlement of <a href=\"https:\/\/www.bitbond.com\/resources\/the-true-power-of-security-tokens-bitbond\/\" target=\"_blank\" data-type=\"post\" data-id=\"2020\" rel=\"noreferrer noopener\">security tokens<\/a><\/li>\n<\/ol>\n\n\n\n<p>This technology reduces the workload and time needed for institutions like SCB &amp; UBP by enabling more digitization through highly specific automation of certain tasks usually achieved manually.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\" id=\"securities-tokenization-platform-developed-to-solve-bank-pain-points\" style=\"font-style:normal;font-weight:400\">Securities Tokenization Platform Developed to Solve Bank Pain Points<\/h1>\n\n\n\n<p>SCB &amp; UBP utilized Bitbond\u2019s securities tokenization SaaS product to develop a <a href=\"https:\/\/www.bitbond.com\/resources\/3-ways-tokenized-securities-revolutionize-securitization-bitbond\/\" data-type=\"post\" data-id=\"455\" target=\"_blank\" rel=\"noreferrer noopener\">securities tokenization<\/a> platform with the purpose of transforming the retail bond lifecycle from issuance to repayment. Its objective is to solve the pain points mentioned above. <strong>It is important to keep in mind that the underlying asset in this setup is not changed<\/strong>, whereas, it is the process of issuing and servicing the asset (i.e. bonds) that is being improved through the use of the securities tokenization platform that is leveraging blockchain technology.<\/p>\n\n\n\n<p>Since that technology reduces the need for licensed intermediaries corroborating trust, the project has to conform with SEC guidelines to guarantee the proper functioning and safekeeping of the market. Therefore, the first phase of the securities tokenization platform was launched under a controlled \u201cSandbox\u201d environment where a traditional issuance process takes place and is being mirrored accordingly on the securities tokenization platform.The securities tokenization platform operates on Stellar protocol, a public-permissionless DLT, easily accessible and highly secure which spares the need of developing a custom private blockchain.<br><br>The securities tokenization platform already solves some of the pain points described, however due to it being only in the first phase of development conforming to regulatory requirements, it does yet have to unleash its full potential. Some of the solutions that it already brings are:<\/p>\n\n\n\n<ul>\n<li>Frontend integration to UBP for digital ATP \u2192 Order taking will be simplified and quickened through digital investor onboarding. The information will be available in real time, payment will be deducted upon allocation confirmation, and reconciliation will not be required<\/li>\n\n\n\n<li>The issuer can issue and instantly allocate through the platform. Automated payments of coupon &amp; principal can be performed<\/li>\n\n\n\n<li>The platform establishes and maintains the Register of Bondholders. Distributed ledger acts as registry. Thus, providing an automated decentralized digital registry and instant proof of ownership<\/li>\n\n\n\n<li>Integrated paying agent<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-embed-handler wp-block-embed-embed-handler wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Liberty - A Bond Investment Platform for Everyone\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/CQenMykcvTs?feature=oembed\"  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tokentool.bitbond.com\/createtokensale\/ethereum\/?utm_source=bitbond&amp;utm_medium=button&amp;utm_term=securities_tokenization_platform&amp;utm_content=&amp;utm_campaign=blog_button_bottom\" target=\"_blank\" rel=\"noreferrer noopener\">Go to Token Generator<\/a><\/div>\n<\/div>\n\n\n\n<p><strong><br>Key Improvements in Service Quality to Investors \/ Bondholders post Issuance:<\/strong><\/p>\n\n\n\n<ul>\n<li>No cost to open a registry account&nbsp;<\/li>\n\n\n\n<li>Instant Registry Confirmation upon allocation of bonds \u2013 via email and post (if required by bond holder). No replacement cost if registry confirmation is destroyed, stolen, lost or mutilated&nbsp;<\/li>\n\n\n\n<li>No paperwork or cost required by the bondholder to perform the tasks below:<\/li>\n\n\n\n<li>Servicing and confirmation times will reduce from days to minutes&nbsp;<\/li>\n\n\n\n<li>Check their bond ownership, send certification request by email, provide statement of account at any desired frequency&nbsp;<\/li>\n\n\n\n<li>Check key documentation in relation to their bonds&nbsp;<\/li>\n\n\n\n<li>Change their cash settlement bank details&nbsp;<\/li>\n\n\n\n<li>Non-trade transfer of bonds in the registry&nbsp;<\/li>\n\n\n\n<li>The securities tokenization platform has online self-service with built-in security mechanisms to ensure identity confirmation<\/li>\n\n\n\n<li>No intermediary required by the investor to sell their bonds to the Issuer. Time to service and bondholder effort will be reduced significantly<\/li>\n\n\n\n<li>Ownership change in any secondary transfers will be instantaneous<\/li>\n\n\n\n<li>Communication between Issuer and Investor will be seamless. The securities tokenization platform will offer an investor communication channel to direct investor queries to the Issuer and report<\/li>\n\n\n\n<li>Issuer\u2019s obligations to the Investors. Regular covenant compliance reports from Issuer will be online.&nbsp;<\/li>\n\n\n\n<li>The Regulator has instant access to list of bondholders at any point of time and the full audit trail of bond movements across lifecycle of the bonds<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"conclusion\" style=\"font-style:normal;font-weight:400\">Conclusion<\/h2>\n\n\n\n<p>Financial markets are shifting, the system of the banks as it used to work for the last decades has already begun to change and there are no longer any doubts that these changes will become irreversible. With this project, Bitbond together with Standard Chartered Bank and UnionBank of the Philippines took another step towards democratization of financial investments and financial inclusion, improvement of safety and stability of financial systems, increased transparency, markedly improved transaction speed, enabling a modern and innovative way to participate in the financial market.<\/p>\n\n\n\n<p>Make sure to <a href=\"https:\/\/www.bitbond.com\/contact-us\/\" data-type=\"page\" data-id=\"224\" target=\"_blank\" rel=\"noreferrer noopener\">contact us<\/a> or try <a href=\"https:\/\/tokentool.bitbond.com\/\" data-type=\"URL\" target=\"_blank\" rel=\"noreferrer noopener\">Token Tool<\/a> to create token.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article dives into the real life use case of Standard Chartered&#8217;s tokenization platform. Learn how securities tokenization platforms provides you with significant advantages.<\/p>\n","protected":false},"author":2,"featured_media":2970,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[13,24],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/posts\/384"}],"collection":[{"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/comments?post=384"}],"version-history":[{"count":14,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/posts\/384\/revisions"}],"predecessor-version":[{"id":2972,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/posts\/384\/revisions\/2972"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/media\/2970"}],"wp:attachment":[{"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/media?parent=384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/categories?post=384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bitbond.com\/wp-json\/wp\/v2\/tags?post=384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}