Japan Set to Introduce Tokenized Stocks for Investors

Japan is gearing up for a groundbreaking event as Osaka Digital Exchange Co. plans to roll out a new service, offering security tokens to the public. This move, scheduled for December 25, 2023, marks the debut of digital securities in the country's financial landscape. The initiative led by Ichigo Inc. and Kenedix Inc. is designed to meet the growing demand among individual investors for innovative asset classes.

Ichigo Inc., based in Tokyo, is set to sell securities valued at approximately 3 billion yen or over 20.1 million USD, backed by real estate investments. The relatively modest amount indicates a market test to assess demand and profitability for this specific category of financial instruments. Japanese authorities have previously expressed their intentions to steer away from risky assets, indicating a cautious approach.

As per the Bank of Japan, Japanese households possess assets totaling over 2000 trillion yen ($13 trillion). However, more than 50% of these assets are in deposits, typically offering interest rates close to zero, prompting a push towards innovative investment avenues like security tokens.

Several countries, including Hong Kong and South Korea, are actively advocating for regulatory frameworks to boost demand for security tokens. These initiatives aim to foster a conducive environment for embracing new financial instruments within their respective markets.

Ichigo Inc. has previously structured digital securities invested in residential real estate, albeit on a smaller scale targeting individual investors and business owners. The market for Security Token Offerings (STOs) in Japan remains relatively small, primarily focusing on real estate securitization involving hotels, resort apartments, logistics facilities, among others. Progmat Inc., a platform managing digital securities, reports an outstanding issuance balance of 127 billion yen.