How to Invest in Tokenized Bonds with PDAX: A Comprehensive Guide

Investors in the financial market typically fall into three categories:

• The aggressive investors, who are willing to take high risks for high returns, often investing heavily in the stock market or cryptocurrencies, including meme coins.
• The moderate investors, who are willing to accept some level of risk for higher returns, opting for a mix of stock market investments and bonds, or savings in banks. When it comes to cryptocurrencies, they usually stick to the top 10 by market cap.
• The conservative investors, who prefer low-risk investments, such as bonds and bank savings only.

However, there’s a growing segment of investors drawn to cryptocurrencies due to the advantages of blockchain technology. These advantages include safer, more secure, and permanent transactions compared to traditional finance.

Did you know that the Philippine Digital Asset Exchange (PDAX), one of the local players in the crypto industry, is offering tokenized bonds, or bonds minted on the blockchain? 

What’s the Significance: This guide aims to explain what a bond on a blockchain is and how to invest in tokenized bonds that are available on crypto exchange giant PDAX.

Bonds 101

What is a Bond? 

• A bond is a security where the investor will lend money to the borrower, and after a set date, the borrower must pay the lender with a fixed interest.
• As defined by PDAX, a bond is evidence of indebtedness issued by the borrower to the lender, or the investor. 
• But it should be noted that in this investment instrument, the borrower does not have a direct communication, or even a notarized contract, with the lender. 
• What happens is that the borrower will issue bonds and post them to different financial institutions and the lenders will buy those bonds. 
• It is similar to investors buying a cryptocurrency. But in bonds, there is a fixed interest rate and bonds are owned by a centralized entity. 
• For instance, Celeste bought a bond from a traditional bank for ₱10,000. The maturity date is 6% yield for three months. After the maturity date, her investment becomes ₱10,600. 
• There are two entities that offer bonds, a corporation and a government. 

What is a Treasury Bond?

• Bonds that are issued by the Philippine government are called the treasury bond, or T-bond. 
• The Bureau of Treasury (BTr) is the government agency responsible for issuing T-bonds, which could be at a discount basis, at a premium, or at par payable on maturity or at coupon dates.
• T-bills are only short-term, with the duration before the maturity date either 91, 182, or 364 days. T-bills are sold at a discount with the same face value.
• Meanwhile, there is also a so-called “Retail Treasury Bond” (RTB), which typically haa a longer maturity period, ranging from a few years to even more than a decade. RTBs are more suitable for conservative, yet medium to long-term investments.
• These bonds are used by the national government to fund the executive department’s projects and programs.

What is a Tokenized Bond on PDAX?

• Before 2023, PDAX CEO Nichel Gaba confirmed that BTr has approved the sale of T-bondsand RTBs tokenized on the blockchain. 
• Basically, PDAX has partnered with bonds.ph Inc., which serves as the broker for the tokenized bonds that they offer. 
• According to PDAX, a tokenized bond is a bond that is being turned into digital tokens. This method produces better security and ease of use. 
• Within the PDAX app to buy and keep track of their investments. Bonds are not yet available on the PDAX website.
• The minimum amount of tokenized T-bonds that users can buy on PDAX is ₱500 while for RTB is ₱5,000.
• Worth Reading: Philippines Introduces Blockchain Tokenized Treasury Bonds via PDAX

Buying Bonds at PDAX

Create an Account

• Create and verify a PDAX account, at least level 2. 
• Within the home page, click the Bonds icon or click the “Create Bonds Account” link on the Portfolio page.
• Read and accept the Legal Agreements to be shown.
• Submit the additional KYC Information, including the SSS or GSIS number, TIN number, and mobile number.
• Review and submit the application. Note that the information submitted can never be edited once the application has been submitted.  

Purchase Bonds

• Within the home page, click the Bonds icon. 
• Go to the “Trade” feature in the Bonds section. 
• Choose the available bonds that will be invested in.
• Type the desired amount. 
• Confirm the transaction. 

Dates to Remember

• Offer Period: The only dates that the bond will be available on PDAX.
• Award Date: The investor will be informed via email whether the investment is fully, partially, or not awarded along with their corresponding amount.
  • According to PDAX, the decision on whether the investor will be granted an award depends on what the BTr will issue to bonds.ph Inc. 
• Issue Date: The date when the bond orders are issued to the investor. It happens two business days after the awarded date.
• Maturity Date: The date when the bond reaches its maturity. The investor will receive their credit upon maturity, which includes the bond face value, or the investment fund, along with the interest earned.

Overall

Tokenized bonds are indeed a game changer in the financial investment landscape. 

Imagine avoiding investing in traditional investment assets because transactions can be unsecured and too much drama before buying security might happen—tokenized bonds solve this issue. 

So, if you are a conservative investor who wants to enjoy the benefits of blockchain technology but is not into crypto trading, tokenized bonds on PDAX are available!

This article is published on BitPinas: How to Invest in Tokenized Bonds with PDAX: A Comprehensive Guide

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