Thai government targets public with tokenised bond issuance

Thailand: state authorities have been exploring blockchain use for a number of years, with a project examining how digital ledger technology (DLT) could be used for government debt issuance launched in 2018 I Credit: Markus Winkler (Pixabay)

Thailand’s government is to pilot the issuance of tokenised government bonds worth Baht 5 billion (about £118 million/$148 million), the country’s finance minister has announced.

The move – which provides the latest example of the public sector globally experimenting with financial technology for a bond issuance – aims to reach diverse investors, including potential retail investors (members of the public) of any financial means, Pichai Chunhavajira said, according to local media reports.

The issuance, which will be run as a ‘sandbox’-style (test) initiative, will see the tokenised bonds issued on a dedicated digital platform before the end of government’s current fiscal year (September 2025). 

Details including trading mechanisms are yet to be finalised, The Nation reported from capital Bangkok, adding that, when agreed, the fully-fledged plan will be submitted to Bank of Thailand (central bank) for approval.

It is envisaged that people will be able to invest a sum as low as Baht 1,000 (about £23/$30). The issuance will, more broadly, enable the state to raise capital, help address budget deficits and refinance existing debt. 

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Thai blockchain bonds to date

The planned issuance comes almost four and a half years after Bank of Thailand announced that it had successfully launched a new platform leveraging blockchain technology for government savings bonds.

A project examining ways that digital-ledger technology (DLT) could be used for government debt issuance – its ‘DLT Scripless Bond Project’ – applied blockchain to develop a ‘secure and efficient’ government bond infrastructure, the central bank said (September 2020), stating that it aimed to ‘enhance investors’ buying experience, improve operational efficiency and reduce overall cost’. The central bank kicked off the project in 2018.  

The new infrastructure successfully went live by supporting ‘1 Baht Bond’ and ‘Moving Forward’ government savings bonds. Fifty billion baht-worth of government savings bonds sold out in a week.

Bank of Thailand said at the time that, during a subsequent phase, the infrastructure would ‘expand to support all different government bonds, both retail and wholesale, to fully served demand of all stakeholders.’

The effort to develop a ‘secure and efficient’ government bond infrastructure involved collaboration among eight institutions including Bank of Thailand, Public Debt Management Office, Thailand Securities Depository Co., Thai Bond Market Association and selling-agent banks, with IBM as technology and cloud platform partner, according to a press release issued by IBM in October 2020.

RELATED ARTICLE Philippines offers first tokenised Treasury bonds in digital technology drive – a news story (22 November 2023) on the Philippines Bureau of the Treasury announcing its first offering of tokenised Treasury bonds, aimed at institutional investors, stating that it wanted to ‘provide the proof-of-concept for the wider use of DLT in the government bond market’

Blockchain bonds’ benefits

‘In the past, the sale of government savings bonds was a complex, multiparty, time-consuming process that relied on a non-real-time system, with duplicated validation steps and manual reconciliation prone to data errors,’ IBM’s 2020 press release noted.

‘As blockchain technology streamlines the processes of bond issuance for issuers, underwriters, registrars, investors and key ecosystem participants, the government savings bond platform now becomes an immutable, real-time single source of truth for network participants, which minimises the redundant validation and reduces the costs of reconciliation,’ the company explained.

‘In addition, Thai investors can now purchase bonds up to the maximum value of their individual allocated quota from a single bank,’ it added.

The benefits of using blockchain technology for government bond distribution is ‘shared across stakeholders, and include faster bond issuance for investors, decreased workloads and processing time for issuers, underwriters and registrars, as well as greater transparency and reduced operating costs across the entire value chain,’ IBM stated.

RELATED ARTICLE Pacific island nation unveils blockchain-based savings bond ‘Palau Invest’ prototype – a news story (9 October 2024) on the government of the world’s smallest countries showcasing a prototype of a blockchain-based savings bond system

Global trend towards tokenised bonds 

Other nations’ state authorities elsewhere in Southeast Asia, and across the world, have also been leveraging blockchain technology for bond issuances.

For example, Hong Kong authorities announced a successful issuance of tokenised green bonds in February 2023 (and in August the same year published a report setting out potential next steps to promote the wider use of tokenisation technology for bonds). In 2024, Hong Kong’s government completed an issuance of two-year digital green bonds denominated in HK dollars, renminbi, US dollars and euro. The Hong Kong Monetary Authority described this issuance as ‘the first multi-currency digital bond offering in the world’. 

The Philippines government announced its first offering of tokenised Treasury bonds in November 2023, stating that it wanted to ‘provide the proof-of-concept for the wider use of DLT in the government bond market’. 

In 2018, the World Bank launched Bond-i, the world’s first bond to be created, allocated, transferred and managed through its lifecycle using DLT. The European Investment Bank (EIB), the lending arm of the 27-member European Union (EU), has also issued a growing number of digital bonds; and, just over three months ago, the UK government announced details (November 2024) of a planned pilot issuance of a ‘digital gilt instrument’ using DLT.

At a more local level, the public authority in the Swiss city of Lugano issued a six-year bond of up to CHF 100 million (about £88m/$108m) via blockchain – a move trumpeted as a public sector ‘first’ – just over two years ago (January 2023). In May 2024, the US city of Quincy (Massachusetts) issued tax-exempt bonds via blockchain to “utilise emerging technologies to create greater financial participation and better economic outcomes for our constituents” – apparently becoming the first example of a US municipality carrying out a blockchain bond issuance.

RELATED ARTICLE Blockchain bonds: digital issuance breakthroughs build buzz – a write-up of a webinar (convened by Global Government Fintech on 23 March 2023) asking: ‘Blockchain-based bonds: what potential for the public sector?’ (the write-up contains a link to a video recording, which is 1hr 23min 29sec)

Thai stablecoins and sandboxes

Chunhavajira announced last month (January) that Thailand’s finance ministry is planning to launch a Baht 10 billion (around £236 million/$297 million) stablecoin backed by government bonds in 2025, The Nation also reported.

A stablecoin, sometimes referred to as a stabletoken, is a type of digital asset or cryptocurrency that aims to maintain a stable value by being pegged to an underlying asset – government bonds in the case of Thailand.

In the same spirit as the tokenised government bond issuance, the stablecoin aims to make investment opportunities more accessible to the general public, rather than just large investors and financial institutions.

Thailand’s Public Debt Management Office is tasked with developing a central platform for secondary market trading to allow easy buying and selling of the stablecoin, according to The Nation’s report, which stated that the platform would initially be used for government bonds.

In other recent fintech-related developments in Thailand, Bank of Thailand (BOT) launched an ‘enhanced’ regulatory sandbox, with programmable payments as its first theme, in June last year. Its sandbox was introduced in 2016. The central bank announced that the ‘enhanced’ version of its sandbox ‘expands the scope of the current regulatory sandbox framework to include financial innovations not yet authorised by the BOT’ but within a limited scope and timeframe.

The Thai Securities and Exchange Commission (SEC) announced the launch of a ‘Digital Asset Regulatory Sandbox’ just over six months ago (August 2024). This has been set up to ‘facilitate experiments and the development of innovations supporting the efficient provision of digital asset services in the real-life context’.

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