KUALA LUMPUR: CIMB Group Holdings Bhd
’s pilot to test the settlement of tokenised sukuk using tokenised deposits could lay the groundwork for a faster and more efficient institutional capital-market settlement.
CIMB Group Islamic banking chief executive officer Ahmad Shahriman Mohd Shariff said the pilot revolved around three main things – inclusivity, transparency and speed.
He explained this will allow settlements to take place at a rapid pace in a safe environment.
“All this will help Malaysia move forward in terms of our relevance in the capital market space. More importantly, the introduction of digital assets gives Islamic finance the ability to access a fast-growing area globally,” he told reporters at Malaysia’s First Tokenised Deposit Settlement of Tokenised Sukuk launch here yesterday.
CIMB group wholesale banking treasury and markets head, Sylvia Wong said the aim of the pilot was to explore tokenisation across issuance and its operational workflows.
The pilot was conducted in relation to a RM1.68bil issuance under CIMB Islamic Bank Bhd’s existing RM10bil Senior Sukuk Wakalah Programme.
Out of the total issuance, RM1.38bil is via a tokenised sukuk and subscribed by 12 institutional investors, while the remaining RM300mil was issued as a traditional sukuk.
The tenure for the former included five, seven, 10 and 15 years with its percentage 58%, 91%, 80% and 78% respectively.
“There were 46 different investors in total. The order book was 1.73 times covered – the pricing date was Aug 19 and the settlement date was Aug 27.
“Both sukuk and deposit were settled together in a coordinated on-chain settlement process,” Wong explained.
She added the capabilities are clearly there for a better market settlement, as once the programming starts, it is settled automatically. However, she pointed out that investor readiness and interoperability remain the bigger hurdles compared to the technology.
She said RM300mil in traditional sukuk was a deliberate set figure because some of the investors were not ready to accept a digital format for now but may want it in a couple of months.
On the other hurdle, Wong said today’s institutional market is not instantaneous, and there is friction due to traditional rails needing to go through traditional processes.
“The traditional process could involve corresponding banks needing to send a message for the transfer to happen. In contrast, if everyone is on the same blockchain technology, the transfer would be instant. And we may not be ready just yet,” she said.
According to her, not many countries are ready for that kind of frictionless settlement, so for now a less frictionless process will have to suffice.
For legality’s sake, Wong said the pilot was done in a very controlled sandbox, so there were proper terms of testing and being able to collaborate with regulators.
Concluding, Ahmad Shahriman said the real achievement of this pilot was convincing major fund managers and the government to set up the infrastructure to be able to settle.
For CIMB, it runs on its private permission blockchain ledger called CIMB Blockchain Connect.
Meanwhile, Finance Minister II Datuk Seri Amir Hamzah Azizan said the next generation financial systems will not be defined by technology alone.
