As indicated in a press release issued on November 20, the Osaka Digital Exchange is set to start the trading of security tokens launched by Ichigo and Kenedix, marking the potential onset of Japan’s first digital securities trading.
The Osaka Digital Exchange’s action will have a major impact on the Japanese financial system. It is a reflection of the expanding global trend in the financial sector toward digitalization. This will be a first for the nation when it launches next month.
Ichigo, a Tokyo-based company, is expected to spearhead the initiative by offering about ¥3 billion ($20.3 million) in securities supported by real estate holdings.
Security tokens are the central initiative of this digital securities trading project. These tokens, which stand in for ownership in an underlying asset like real estate or a business, are digitally managed securities. They give investors an easier and more affordable way to buy, sell, and keep assets. Tokenizing these assets makes purchasing, selling, and transfer easier and more accessible to a larger group of investors.
The enhanced liquidity of security tokens is one of the main advantages. Conventional assets, like real estate, can be hard to sell and have limited liquidity. Tokenizing these assets, however, makes it possible for investors to buy and sell with ease on online marketplaces.
As a result of enhanced liquidity, investors have access to a greater variety of assets and may be able to generate higher profits. The launch of digital securities trading in Japan coincides with an increase in private investors’ desire for alternative assets. At the end of last year, Japanese households had approximately ¥2 quadrillion in financial assets, but a large amount of these were low-yielding deposits. Investors are looking for other possibilities with higher yields because interest rates are so low.
This demand is met by the digital securities market, which gives investors access to a greater variety of assets, including real estate. Real estate assets like hotels, hot spring resorts, and logistics centers can be securitized to let investors share in future returns without having to make substantial upfront payments.
The Osaka Digital Exchange’s introduction of digital securities trading is just the start of what is anticipated to be a revolutionary journey for the Japanese financial sector. With an outstanding balance of issuance of ¥127 billion, the size of security token offerings in Japan is still relatively small but anticipated to increase dramatically in the upcoming years.