DIGITAL securities exchange ADDX is working with Japanese financial services company Tokai Tokyo on security token issuances by Japanese real estate companies and banks.

These future deals will be tokenised on ADDX's platform and distributed to investors in Japan. Japanese investors will also be able to trade the digital securities on the ADDX secondary exchange through Tokai Tokyo, the companies said in a joint press statement on Thursday (Nov 11).

This comes after Tokai Tokyo, which is listed on the Tokyo Stock Exchange, received a licence from Japan's Financial Services Agency to deal in security tokens. Under the tie-up with ADDX, Tokai Tokyo will be the first company in Japan to distribute security tokens that are tradeable on a secondary exchange.

It will also be the first in Japan to deal in security tokens for non-liquid assets, as previous licensees received regulatory approvals for liquid assets. Non-liquid assets include, for instance, collective investment schemes and trust certificates.

ADDX's chief commercial officer Choo Oi Yee said she expects this partnership to "yield multiple deals over the next few quarters", noting that regulators in Japan are forward-thinking on the issue of digital securities.

The company expects this to bring a "signficant increase" in revenue, but could not go into details when asked by The Business Times.

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"There are no ballpark estimates available at this time. But given Tokai Tokyo's network in Japan of 144 offices and US$38 billion in client's assets under management, we are confident the partnership will result in significant deals," Choo said.

Japanese investors have traditionally shown a strong interest in real estate investments, but the opportunities open to them are curtailed because of the high minimum investment sizes in the private markets, she said.

"Digital securities can fractionalise investments, helping individuals to diversify their portfolios and to invest with a strategy and asset-mix closer to that of family offices or institutions. This promises several positive knock-on effects - from better retirement adequacy to a fairer distribution of wealth," Choo said.

Tokai Tokyo was a lead investor in the US$50 million Series A fundraising round by ADDX in January 2021. It made its first investment in ADDX, previously known as iSTOX, in 2019.