UnionBank, Standard Chartered Trial Blockchain-based Bond Issuance

December 14, 2020  — UnionBank of the Philippines has successfully used blockchain in issuing a tokenized retail bond worth Php 9 billion in a proof-of-concept trial issuance in partnership with Standard Chartered.

The 3 and 5.25-year dual tranche issuance totaling PHP9 billion by UnionBank was successfully mirrored on the platform co-created by UnionBank and SC Ventures, the innovation and ventures arm of Standard Chartered, UnionBank said in a statement. To stay within retail bond guidelines, the orders received were tokenized and would mirror the traditional transaction although it wouldn’t be allocated directly to investors.

This latest issuance was first reported in local publications in the first week of December, stating it’s the third part of UnionBank’s Php 39-billion bond program. After a week, both banks announced that the Php 9 billion bond offering was mirrored on the blockchain. 

After previous uncertainty over technology selection, BitPinas probed UnionBank. Official sources at UnionBank confirmed that Stellar was successfully used as the primary blockchain technology for the service.

Bonds are a form of fixed income instrument representing a loan made by an investor to a borrower, which could be a corporate or the government. Bonds have due dates to when the loan will be paid to the owner.

Alex Manson of SC Ventures said the platform was created to provide retail investors with a trusted and transparent platform to gain direct access to bonds. 

For Jose Emmanuel Hilado, UnionBank’s Executive Vice President and Chief Finance Officer, the collaboration with Standard Chartered on the proof of concept aims to pave the path to democratizing bond investing:

“Through tokenized bond issuances enabled by blockchain technology, and the availability of these through digital platforms, we reduce intermediation costs due to smart contract automation, resulting in lower costs of investing and increased accessibility to Filipinos both here and abroad.” — Jose Emmanuel Hilado, UnionBank

According to UnionBank, its Online Bond Reservation portal allows clients to view and place orders and reservations for corporate bond offerings digitally. “The portal also makes the purchase of bonds completely paperless and more efficient as it cuts the processing time for customers from a couple of days to mere minutes,” UnionBank added.

In a media briefing, UnionBank President Edwin Bautista said they are thinking of exporting this blockchain-based platform to the overseas market. 

“If we’re talking about blockchain, there’s no reason why the Philippines can be just a follower. This is an example of an execution where the Philippines can actually be a lead player as we have shown here. We have developed a blockchain platform that can be adapted in or sold to other countries,” Bautista said, as reported by the Inquirer.

In a statement, Commissioner Ephyro Luis Amatong of the Securities and Exchange Commission (SEC) said proof-of-concept issuance on the blockchain that mirrored the traditional transaction demonstrated the efficiency and effectiveness of tokenization and the use of distributed ledger technology. While such activities would still need an SEC approval before being fully implemented, he recognized the work done in fintech by incumbent players in the industry. “This aligns well with the government’s advocacy to accelerate digital delivery and serve wide market segments,” the Commissioner added.

UnionBank and Standard Chartered, along with licensed virtual currency exchange PDAX and the Bureau of the Treasury previously collaborated to launch Bonds.PH, where bonds are sold to retail investors directly through a mobile app. Bonds, a type of financial instrument that’s normally out of reach for every day Filipinos, have become more accessible through this venture. 

This article is first published by BitPinas: UnionBank, Standard Chartered Trial Blockchain-based Bond Issuance