NongHyup Bank Reviews Direct Issuance of Smart Farm Token Securities... Pilot Service Scheduled for Launch

"Contribution to Token Securities Promotion and Ecosystem Expansion"

NH Nonghyup Bank is accelerating its efforts in the Security Token Offering (STO) business, which is considered a future growth engine. The bank is reviewing plans to directly issue security tokens backed by smart farms as underlying assets and will launch a pilot service by the end of this month that allows consumers to experience virtual investment.

Recently, Nonghyup Bank signed a contract with a law firm to explore the direct issuance of security tokens backed by smart farm underlying assets. Security tokens are products utilizing blockchain technology. They are created by linking blockchain-based tokens with fractional ownership of tangible assets such as real estate or artworks. This enables fractional investment in physical assets.

Nonghyup Bank’s security token business is being pursued in two main directions. One is the STO business that supports fractional investment operators to issue investment contract securities through a platform created by Nonghyup Bank. The bank’s platform was selected in June as a ‘blockchain private sector focused project’ by the Ministry of Science and ICT and the Korea Internet & Security Agency, and the platform was completed last month. According to Nonghyup Bank, technical preparations have been completed to issue investment contract securities approved by the Financial Supervisory Service. The bank’s issuance platform allows operators to perform all tasks such as issuing security tokens by connecting application programming interfaces (APIs) without needing to develop separate blockchain tools.

The other direction is for the bank to directly issue security tokens backed by smart farms as underlying assets. Since the issuance platform is a B2B (business-to-business) service for fractional investment operators, it does not allow buying and selling of security tokens. Therefore, the long-term goal is to create a B2C (business-to-consumer) service so that customers can invest in smart farm-related security tokens. Nonghyup Bank stated that it will first provide a virtual investment experience service to consumers from the end of this month through next month to promote the security token platform and contribute to ecosystem expansion.

Provided by NH Nonghyup Bank

Security tokens backed by smart farms have the advantage of being easier to value compared to other physical assets. Fractional investment operators must submit securities registration statements to the Financial Supervisory Service to issue security tokens. In cases where Hanwoo (Korean beef cattle) or artworks, which are commonly used for fractional investment, are valued at market price, the Financial Supervisory Service often finds it difficult to make judgments. However, smart farms are different. A smart farm is an agricultural method that uses information and communication technology (ICT) to monitor crop growth and manage them in optimal conditions. When structures are built for smart farms, the value of the facilities is already determined, making it easier to evaluate value when dividing joint shares.

Nonghyup Bank aims to achieve public interest goals rather than profitability through the issuance of security tokens backed by smart farm underlying assets. The bank plans to utilize STOs for agricultural understanding and digital financial education. For example, it will issue security tokens so that students can invest in smart farms established at schools.

If the STO market becomes active, Nonghyup Bank is expected to significantly increase its non-interest income. Fee income from supporting security token issuance through the platform is a representative example. Additionally, investment deposits separated and held through the platform can be used as low-cost deposits.