Japan's token securities expand into municipal bonds and public projects [Crypto Briefing]

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\r\n[The Financial News] In Japan's capital market, token securities are expanding beyond private investment products and into a financing tool for local governments and public institutions. Major financial firms have completed a proof-of-concept for STO settlement using tokenized deposits, and the legal groundwork has also been laid for local governments to issue 'digital municipal bonds.' As South Korea's financial investment industry prepares for the launch of its STO distribution market, the need for asset models that combine public value and profitability is also being raised.
According to foreign media and industry sources on the 28th, Japan's STO market is moving quickly to address settlement delays, a long-standing issue. Recently, SBI SECURITIES Co., Ltd., Daiwa Securities Group Inc., SBI Shinsei Bank, and Osaka Digital Exchange (ODX) completed a proof-of-concept for STO settlement using tokenized deposits called DCJPY.
Until now, Japan's STO market has relied on a structure in which ownership transfers of securities are processed immediately on the blockchain, while payment settlement depends on the existing bank transfer system. The latest settlement test links tokenized deposits and security tokens for the securities issued. Based on the data, the consortium plans to address remaining issues such as system simplification and build a standard settlement infrastructure for the market.
Legal groundwork is also being improved to allow local governments to issue municipal bonds using STOs. This shows that the use of STOs is expanding from yield-focused private assets into public areas such as regional development and policy finance.
These 'digital municipal bonds' can combine interest income with non-monetary benefits such as local specialty products, lodging vouchers, and local experience services. Investors can gain both the satisfaction of contributing to society and local perks. Local financial institutions would serve as sales platforms, and the model could later expand to financing for institutions with strong public value, such as school foundations, medical corporations, and sports clubs.
South Korea's financial investment industry, which is preparing to launch its STO distribution market in January next year, is also paying close attention to Japan's case. At present, domestic STO discussions remain focused on fractional investment in private underlying assets such as art and real estate. However, observers say the market needs to expand into structures linked with public projects to ensure long-term sustainability.
An industry official said, "Japan's digital municipal bonds go beyond simply slicing up and selling assets. They function as a direct financing infrastructure in which local residents and the related population participate in projects and share the results." The official added, "South Korea also needs systems and ecosystem design that can use STOs to raise funds for the public sector."
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elikim@fnnews.com Kim Mi-hee Reporter