Osaka Digital Exchange Co. is set to revolutionize Japan’s financial landscape by introducing the country’s first-ever digital securities trading.
On November 16, Osaka Digital Exchange (ODX) announced plans to launch Japan’s first-ever digital securities trading on December 25. The platform will feature security tokens issued by real estate firms Ichigo Inc. and Kenedix Inc., with the inaugural trading focusing on securities backed by property investments from Ichigo.
Established in 2021, ODX comprises influential figures from traditional finance in Japan, including SBI Holdings and Sumitomo Mitsui Financial Group (SMFG), with the overarching goal of establishing a digital stock exchange. Regulatory approval for ODX’s proprietary trading system for security tokens, named Start, was granted on November 16 by the country’s financial watchdog.
In its announcement press release, ODX noted that:
‘On this occasion, we also publicly announce that we have named our ST market “START”, as it is our firm belief that the more liquidity of STs the start of START will bring, the more funding opportunities there will be. We have named our market in the hope that the ST market will thrive more.”
As part of the launch, real estate firm Ichigo Owners is expected to issue around ¥3 billion ($27.1 million) worth of tokenized securities. The Ichigo Residence Token, set to be the largest issue price ever for an Ichigo Group security token, will be invested in six highly convenient rental residential properties with excellent access to the city center, according to an SBI Holdings press release.
Security tokens, which digitally represent traditionally managed securities, offer increased accessibility, transparency, and efficiency. Despite these advantages, the liquidity of security tokens has been a challenge for widespread adoption. Osaka Digital Exchange aims to address this challenge by providing a regulated platform for the seamless trading of security tokens. Notably, the security token issuance will take place on Progmat, a software platform designed for issuing and managing digital assets.
The introduction of digital securities trading in Japan is expected to create new opportunities for investors, foster diversification, and contribute to the broader adoption of digital securities. While the initial sale by Ichigo is relatively small, it signifies the market’s exploration of demand for unconventional securities.
This initiative aligns with Japan’s broader efforts to offer riskier assets with potentially higher returns, addressing the funding needs of its aging population. The outcomes and opportunities arising from Osaka Digital Exchange’s groundbreaking move are eagerly anticipated as Japan’s financial landscape undergoes transformative changes.
Japan Plans Digital Securities Trading Platform to Unlock Trillions in Household Assets
Japan is setting its sights on tapping into the vast financial assets held by households, which exceeded ¥2,000 trillion ($18.1 trillion) at the close of the previous year. A significant portion of these assets, however, lies dormant in deposits, with interest rates hovering close to zero.
The adoption of digital securities trading in Japan mirrors a broader global trend, with other Asian markets, such as Hong Kong and South Korea, also taking steps to facilitate security token sales. Hong Kong, for instance, has removed restrictions that previously limited such offerings to professional investors, while South Korea has amended laws to permit the issuance and distribution of security tokens.
Ichigo, known for structuring digital securities, has been a key player in this landscape, having previously invested in residential properties through small lot deals targeting individual investors and business owners.
In South Korea, the Financial Services Commission (FSC) has recognized securities as financial investments where investors are not required to make additional payments after their initial investment. Hong Kong’s Securities and Futures Commission (SFC) has also laid down business requirements for offering tokenized securities and other investment products, reflecting the regulatory momentum in the region.
While Japan’s security token offerings market is currently focused on real estate securitization and remains relatively small, this recent development signifies a step towards broader adoption and the integration of alternative assets into the country’s financial landscape.
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