A 10 billion yen deal appears in real estate ST and corporate bond ST, entering a new phase with secondary market and asset expansion[Digital Securities Forum 2023 Event Report, Part 2]| CoinDesk JAPAN

This year’s third Digital Securities Forum was held on December 13th at KABUTO ONE Hall in Kabutocho, Tokyo. The event was co-sponsored by Nihon Keizai Shimbun and N.Avenue, which operates CoinDesk JAPAN.

When the first event was held in December 2021, the subtitle was “A new method of fundraising: the emergence of security tokens,” but this time it was “The dawn of a new chapter in the security token market”. In the three years since the first security token was issued in 2021, the amount issued has more than doubled every year. As the title “The Beginning of a New Chapter” symbolizes, sales will soon begin on Osaka Digital Exchange’s (ODX) START, the first domestic secondary market, and further growth is expected. There is. Furthermore, in addition to real estate security tokens (real estate ST), which have grown faster than those involved originally envisioned, assets such as corporate bond ST are also expected to expand.

The forum began with an opening speech from Mamoru Yanase, Deputy Director-General of the Financial Services Agency’s Policy Bureau. Next, two lectures and two panel discussions were held, with key figures driving Japan’s security tokens on stage.

I will share the details of the day in two parts: the first part (two lectures) and this article (the second part: two panel discussions).

Part 1: Growth exceeding expectations in 3 years ── Expanding possibilities with asset expansion and the emergence of the secondary market[Digital Securities Forum 2023 Event Report]

Corporate bonds and renewable energy infrastructure

The first panel discussion, which followed the speeches by Mr. Saito of Progmat and Mr. Nakao of Kenedix, was entitled “What is ST’s growth strategy in 2024? From asset expansion to the emergence of the secondary market.” Mr. Saito of Progmat, Mr. Atsushi Itaya, Managing Executive Officer of Daiwa Securities Group Headquarters and Daiwa Securities, and Mr. Hijio Amane, Representative Director and President of Osaka Digital Exchange, took the stage.

Regarding the theme of the panel discussion, “Growth Strategy for 2024,” Yuki Kamimoto, CEO of N.Avenue/CoinDesk JAPAN, who served as the moderator, first addressed Mr. Itaya and said, “I’m sorry I’m not the only one wearing a hoodie.” While making the audience feel relaxed, Mr. Itaya raised three points: “development of secondary market,” “expansion of target assets,” and “popularization of digital currency.”

Mr. Atsushi Itaya, Daiwa Securities Group Headquarters, Daiwa Securities Managing Executive Officer

Regarding the expansion of eligible assets, he stated, “In addition to corporate bonds, a variety of assets such as those related to renewable energy, such as solar power generation facilities, will serve as backing assets.” He pointed out that it is difficult for institutional investors alone to provide funds for renewable energy-related infrastructure development, and that it is essential to enable individual investors to invest through security tokenization.

At the same time, Mr. Saito continued to work with Progmat to improve the efficiency of the corporate bond issuance process all at once, starting with the corporate bond pre-marketing system “Biancha,” which Mr. Saito mentioned in his lecture.

Mr. Saito went on to state that in order to promote corporate bond ST now that current book-entry transfer bonds are becoming paperless and digitalized, clear merits will be essential. He said that “settlement using stable coins” will be the key to expanding the corporate bond ST market. He continued that by using blockchain as a foundation, issuing companies and investors can be directly connected, making it possible to carry out a variety of unprecedented marketing measures, such as granting NFTs to investors. He said that there will be new benefits.

Progmat Representative Director Founder and CEO Tatsuya Saito

He also re-explained the security tokenization of VC funds that he mentioned in his lecture. Traditionally, LPS (Limited Liability Partnership), which invests in unlisted venture companies, was the domain of professionals such as institutional investors, but with ST, “It will become possible for individuals to invest in small amounts,” he explained. Although there are still challenges, he said that it has the potential to become a major pillar next to real estate ST and corporate bond ST.

Primary and secondary are the two wheels of the capital market

Mr. Nio Amane, President and Representative Director of Osaka Digital Exchange

Mr. An said, “It is difficult to sell illiquid items to individual investors,” and in response to the discussion between the two, “The primary (issue) market and the secondary (distribution) market are the two wheels of the capital market. ”, he introduced Japan’s first security token secondary market “START”, which will begin trading on December 25th.

The mechanism itself for matching buy and sell orders is the same as that for stocks, but stocks have a sophisticated system called “Hofuri (Japan Securities Depository Center),” which has a long history of operation. He said that the big challenge is to break away from this and use blockchain to realize smaller transaction sizes and create liquidity.

Furthermore, in Phase 2, stablecoins will be used for settlement, realizing instant DVP (Delivery Versus Payment), minimizing the burden of post-trade operations after execution, and providing a next-generation matching system.

Mr. Saito, who also works on the stablecoin issuance and management platform “Progma Coin,” said, “Stablecoins will appear next year, but it is important that they can be used by individuals.”While existing systems exist, He points out that in order to popularize new products, it is essential that “the situation is what end users want.” In order to further expand the market, Mr. Itaya is also conducting demonstration experiments on issuing security tokens on public blockchains, and developing security tokens that can be connected to various issuing companies, securities companies, and platformers and become industry infrastructure. He stated that he is working on developing a wallet.

Finally, looking back at the discussion, the three participants said, “Security tokens are still a new field.The industry will work together to move forward.” (Mr. Itaya) “Today’s discussion was only about topics that have potential for next year.” There are no issues being discussed.” (Mr. Saito) “If tokenization progresses to its ultimate level, there will be talk that there will be no need for an exchange, but technological progress cannot be stopped.Towards the ultimate goal. “We will move forward,” said Mr. An, which left an impression on me.

Real estate ST is “simply a small-lot product of beneficiary rights”

The second panel discussion, “The current location of real estate STs that drive the ST market and the future outlook for STs,” included Daisuke Miyajima, President and Representative Director of Kenedix, Tomohisa Murakami, Nomura Securities Executive Officer in charge of Investment Banking Products, BOOSTRY CEO Toshinori Sasaki took the stage.

In August 2022, Kenedix converted the tower condominium “River City 21 East Towers II” into a security token at a cost of 13.4 billion yen, the largest in Japan. Nomura Securities was in charge of sales and BOOSTRY was in charge of developing the blockchain platform, and the discussion centered on this project.

Daisuke Miyajima, President and Representative Director of Kenedix

Looking back on the project, Mr. Miyajima said, “As Kenedix, we put all our heart and soul into this project.” Although it was a large property with 642 units and an appraised value of 30 billion yen, more than 10 years had passed since it was built, so renovations were carried out in stages. The company explained that it implemented a “value-add strategy” to improve vacancy rates and increase rents. On the other hand, regarding security tokens, he said to the audience, which also included senior citizens, that they are “simply a small-lot product with beneficiary rights.”

It’s true that some people may get nervous when they hear the term “security token,” but “real estate beneficiary rights products” are familiar to those who are familiar with real estate investment. Mr. Miyajima’s first message was, “I want you to feel safe.” I sensed his long career and insight in the real estate investment industry.

Mr. Murakami said, “At first, there were concerns about the large number of 13.4 billion yen, but sales were very strong.” “The equity story (to explain the investment project to investors) was solid.” “I am interested in real estate investment, but it is difficult to prepare a large amount of money.However, with security tokens, I can access these large properties” was a major selling point, he analyzed.

Tomohisa Murakami, Executive Officer, Investment Banking Products, Nomura Securities

In addition, in this project, we will provide preferential treatment depending on the number of Security Tokens (ST) purchased. In connection with Tsukishima, where the property is located, “Tsukudani Token”, which allows you to receive the famous Tsukudani, will be issued as a utility token (UT). “I think Tsukudani Token is the first initiative in blockchain history,” Mr. Sasaki reflected.

In addition, restaurant meal coupons and hotel accommodation coupons are issued as UT. Mr. Sasaki said that UT was also managed by the same blockchain platform “ibet for Fin” as ST, and was able to build an unprecedented relationship with investors. By the way, 1089 pieces of tsukudani were shipped.

Orchestra or famous pianist?

When the discussion turned to future developments, Mr. Miyajima said, “We have a proven track record as a real estate management company for institutional investors, but it has been a long-held dream of us to provide asset management services for individual investors.” He talked about future developments by using blockchain, which allows him to obtain investor information for each deal in real time, saying, “There are only 8 deals, but when we reach, say, 100 deals, it will be a tremendous amount of data.”

Mr. Murakami mentioned Hitachi’s issuance of a 10 billion yen digital environmental bond, which was announced about a week before the forum. Hitachi collaborated with JPX Research Institute, Nomura Securities, and BOOSTRY for the publication. He said that the appearance of deals in the 10 billion yen class in both real estate ST and corporate bond ST may have been an “opportunity to attract a lot of attention.”

He also pointed out that environmental bonds are linked to investors’ interest in sustainability and transparency, and that “responsible investing” may become a major trend in the use of blockchain.

Mr. Miyajima mentioned another future development: converting overseas real estate into ST. Kenedix started out as a Japanese base for overseas companies and has experience in overseas real estate. “At a time when the reliability of the yen is being shaken, if we can purchase prime real estate from around the world as ST, and then buy and sell it on ODX, it will be the second act of our real estate ST business.”

When asked by Kamimoto what he sees as the next year’s trends as a blockchain vendor, Sasaki predicts that in addition to the use of investor information, products aimed at the core market will emerge. “Over the past three years, we have seen many possibilities. In 2024, we will see success stories based on each company’s strategy,” he said.

Toshinori Sasaki, CEO of BOOSTRY

Regarding next year’s developments, Murakami said that while it is of course important to expand the market, “I also want to think about what we can do to ensure the healthy development of the market.”

In conclusion, Mr. Miyajima said, “Many people ask me, “Why is Kenedix doing ST? Why not a REIT?” But at the same time, I am also asking myself that question. “The Lied is a very sophisticated product, but it has lost the touch of real estate.If I were to compare it to classical music, if you go to hear an orchestra, you go to the Lied, and if you go to hear a famous pianist or violinist, you go to the ST.”It’s very understandable. He briefly explained the characteristics of real estate security tokens.

Yuki Kamimoto, Representative Director and CEO of N.Avenue/CoinDesk JAPAN, moderated the panel discussion.

A security token that has achieved steady growth over the past three years. Next year’s 4th Digital Securities Forum will likely feature more diverse themes, such as the development of the secondary market and the current status of diversified assets.

Part 1: Growth exceeding expectations in 3 years ── Expanding possibilities with asset expansion and the emergence of the secondary market[Digital Securities Forum 2023 Event Report]

｜Text/Editing: coindesk JAPAN
｜Image: Keisuke Tada