"Various Effects Expected from Issuing Green Bonds through Token Securities"

It has been analyzed that issuing green bonds as token securities based on blockchain is expected to bring various benefits such as improved transparency, simplified procedures, and an expanded investor base.

According to the BOK Issue Note titled "Cases and Implications of Issuing Green Bonds through Token Securities," released by the Bank of Korea on the 3rd, green bonds are bonds issued to raise funds for eco-friendly projects, where transparency regarding the use of funds and environmental improvement effects is extremely important.

Accordingly, compared to general bonds, strict pre- and post-reporting and external verification procedures are in place. However, these complex issuance and reporting procedures, along with structural information asymmetry between issuers and investors (concerns over greenwashing), are cited as major constraints to the activation of the green bond market.

The report analyzed that issuing green bonds as token securities based on blockchain is expected to enhance transparency regarding the use of raised funds and environmental impact, simplify issuance and post-reporting procedures, and expand the investor base.

Through this, it is anticipated that opportunities for eco-friendly financing will expand to domestic companies, especially small and medium-sized enterprises and mid-sized companies that had limited access to green finance.

Looking at overseas cases, in Hong Kong, the authorities led a pilot issuance of green national bonds in the form of token securities to resolve regulatory uncertainties and verify the improvement effects of issuance procedures through smart contracts.

In Japan, companies and financial institutions collaborated to issue token-type green bonds utilizing blockchain and Internet of Things (IoT) technologies, enhancing transparency regarding the use of funds and automating the collection process of environmental impact information.

Jungmin Bae, head of the Sustainability Growth Office at the Bank of Korea and author of the report, argued that South Korea also needs to consider the potential use of token securities as part of measures to activate green finance.

He added that, especially by referring to the Hong Kong case, it might be worth considering having the public sector lead the market through pilot issuances in the early stages.

However, since legislation related to token securities has not yet been completed, he emphasized the need to accelerate discussions on the bill and to sufficiently conduct related technical experiments in advance to utilize the various technical advantages of token securities.