Japan Seeing Increase in Security Token Biz by Securities Firms

Tokyo, Oct. 16 (Jiji Press)–An increasing number of securities companies are launching services involving security tokens, or digital securities issued with blockchain technology, in Japan. Mitsubishi UFJ Morgan Stanley Securities Co. announced Oct. 9 a security token service, while major brokers, including Nomura Securities Co., as well as midsize and foreign securities firms have also begun handling security tokens. These companies believe that security tokens, which are backed by assets such as real estate and bonds, will help expand their client bases, as the products can be divided into small lots. This is because security tokens require less system maintenance and other costs than conventional financial products. Also, the blockchain technology is said to offer a high level of security. Mitsubishi UFJ Morgan Stanley Securities will partner with Tokyo-based fintech firm Smartplus Ltd. to launch by next March a service enabling clients to invest in real estate security tokens with a minimum lot of 100,000 yen. An official at another securities company that has already begun selling security tokens said, “Investor demand is high, and sales are brisk.” SBI Securities Co. issued Japan’s first security token in 2021, and the cumulative amount issued in the domestic market is believed to have exceeded 260 billion yen. Currently, about 90 pct of the outstanding security tokens are backed by real estate and around 10 pct by corporate bonds. A senior official at a Japanese securities house said, “Thanks to the low issue costs, security tokens for various assets, including aircraft and ships, are expected to hit the market going forward.” In one past instance, a security token was issued as an investment in film production. Security tokens are backed by assets that differ from publicly traded stocks and other existing financial products, a factor that is expected to help expand investor bases. Some in the industry believe that the cumulative issue amount will increase to about 2.5 trillion yen in 2030. Meanwhile, the secondary market for security tokens has been sluggish. A private market funded by the SBI group, Sumitomo Mitsui Financial Group Inc. and some major securities firms handles only six issues, whose combined market capitalization totals merely less than 20 billion yen. The blockchain technology enables the immediate change of security token ownership. With transactions of security tokens taking two business days for settlement, the same interval as that for conventional financial products, however, a senior official at a midsize securities house lamented that the market does not make full use of their characteristics. Still, the secondary market is slated to expand to 11 issues worth some 90 billion yen in total market capitalization in fiscal 2026, thanks to tax system reform and other factors. In addition, Sumitomo Mitsui and others are testing the use of stablecoins, which are also based on the blockchain technology, as a payment method. “The ability to make instant payments will improve convenience and liquidity,” a senior official of a major securities company said, voicing hope for a more active market. END [Copyright The Jiji Press, Ltd.]