DEBT TOKEN – WHAT IS IT?
Debt tokens are one of the forms of application of digital signs (tokens) as a financial instrument connected with investments and attraction of financing. Although this instrument is quite new for our country, has already gained popularity in the investment community.
Like many other financial instruments, debt tokens have two participants. The issuer of the token, or, otherwise, the customer, is a company that needs financing and for its attraction issues debt tokens, and the investor is a citizen or organization that has free cash resources, buys the issuer's tokens for them and receives interest income while owning them.
In their economic essence, debt tokens are similar to a loan, deposit or corporate bond.
In fact, a debt token is a company's obligation to borrow money fr om an investor and return it after some time. The token issuer undertakes to pay interest income to the investor for the use of this money.
ADVANTAGES OF DEBT TOKENS
So, a company wants to raise finance, for example, to scale an existing business or develop a new one. Wh ere can it get the money?
OPTION 1
Go to a bank. However, getting a loan fr om a bank will require a large package of documents. And decision-making by the bank's credit committees usually takes a long time.
In addition, today banks are increasingly using so-called covenants, i.e. certain obligations that the company receiving the loan must take on itself. Among such covenants may be requirements to maintain certain balances on accounts, mandatory agreement with the bank on the methods and amounts of financing raised from other sources, agreement with the bank on its transactions, counterparties, dividend policy, and so on.
For many companies, the complexities and restrictions associated with this method of obtaining funds are unacceptable.
OPTION 2
A further option for raising funds could be to issue securities, such as corporate bonds.
This approach also has a number of advantages and limitations. For example, the activity of issuing securities is rather regulated. The regulator in this case is the Ministry of Finance, and the Securities Department of the Ministry of Finance is responsible for accepting documents, reviewing them and making a decision on the admission of the issuer to issue bonds.
Due to the sufficient regulation of this process, it is also time-consuming. In addition, in order to carry out transactions with securities, participants need to open and maintain accounts in depositories wh ere these securities will be registered, which also entails additional time and financial costs.
OPTION 3
Another possibility for a company may be to raise a loan or financing directly fr om a specific investor. However, it is not always possible for a company to find an investor who, firstly, will agree to provide a loan, and secondly, will have the necessary amount of money for the company.
For such situations, the issue of debt tokens will be an excellent solution and opportunity for the company.
MAIN PARAMETERS AND CONDITIONS OF TOKENOUS ISSUES
When issuing tokens, they have several important parameters and conditions, which company prescribes in a public offer - a White Paper declaration. This document is an analogue of the prospectus that accompanies the issue of shares or corporate bonds.
Among the important parameters of debt tokens are the following.
TOKEN VALUE. Debt tokens can be issued in both national and foreign currencies. In this case, all payments on a given token are made exactly in the currency in which the token is denominated. This is one of the advantages regulated by the Decree of the President of the Republic of Belarus № 8 ‘On the Development of Digital Economy’, which removes the investor's and issuer's risks associated with changes in exchange rates. In this regard, debt tokens win many times over, for example, corporate bonds.
TOKEN DENOMINATION. This is the amount of money for which 1 token can be purchased. As a rule, token issuers set a small token face value. For example, 20 dollars or 50 Belarusian rubles. This allows purchasing tokens actually any investor regardless of the amount of his savings. At the same time, some issuers, on the contrary, set the token face value large, for example, 1 thousand dollars or 5 thousand Belarusian rubles, deliberately limiting the pool of investors for serious and wealthy players.
TOKEN REVENUE RATE, which token issuer pays to investors. It is expressed as an annual percentage. In most cases, the rate of return on tokens is higher than the return on bank deposits, as it carries higher risks for the investor associated with the possibility of default of the token issuer.
FREQUENCY OF INCOME PAYMENT. As a rule, the most popular are monthly or quarterly income payments. This means that investors receive interest income at the end of each month or three months for the previous month or quarter.
More exclusive interest income payment options are less common. For example, after the end of the token circulation period. That is, once, but for the entire period of token ownership.
Another notable form of income payment is the payment at the moment of token purchase. This form is interesting because that the payment of interest income for the entire circulation period of the token occurs at the time of its purchase.
An important parameter of tokens is the presence of the option of early redemption of tokens by the issuer (or, in another way - offer). It implies that during the token circulation period the issuer assumes the obligation to buy back from investors part of their tokens, or maybe all of them, and return the invested funds to investors.
A feature of tokens is also the possibility to work with them on the secondary market, i.e. to sell to another investor or buy from another investor. With the help of secondary market, an investor can, without waiting for the issuer to return the funds, get them from another investor - albeit, perhaps, with some discount. In addition, it is a great way for an investor to get tokens into the portfolio that have already been sold out on the primary market (if other investors offer them on secondary market), and for the issuer to buy back some of its tokens, if it has free resources, and thus reduce the size of its financial obligations to investors.
LEGISLATIVE ADVANTAGES AND DISADVANTAGES DEBT TOKENS
The key advantages are tax and currency preferences which are granted to participants in transactions involving tokens. For example, income of individuals received by on transactions with tokens is not subject to income tax. In addition, the currency legislation, which restricts foreign currency transactions between residents of Belarus, makes an exception for participants in token transactions. As a consequence, investments with tokens become particularly attractive.
The situation with tokens is that users can deposit funds on platform in foreign currency and purchase tokens denominated in that currency. The income that the investor will receive in this case will also be received in the equivalent of this currency and can subsequently be immediately withdrawn to the relevant currency accounts in banks.
Another advantage of debt tokens is the ease of issuing and acquiring this financial instrument compared to cryptocurrencies or other tokenized instruments securities market. After all, many people who have savings and the desire to multiply them with a moderate level of risk, do not have the necessary knowledge, experience or desire to immerse themselves in the world of stock exchanges, trading, constant changes in rates, the value of assets. For many people, passive investing is closer, wh ere they regularly receive a clear, predictable income.
A debt token is no more complicated than a bank deposit. It allows you to predict and choose the term for which the investor is ready to invest his funds. At the same time, companies, which issue tokens, disclose information about themselves, including image and financial information. Many of the issuing companies are well known to investors. They have already established themselves as reliable borrowers and have maintained a high reputation over several years
The main disadvantage inherent in all investment instruments is the risk of loss of savings. Of course, no one is insured against economic, operational and market risks, but competent planning of investments, their diversification into different companies, currencies and in general, the use of several financial instruments for investments will allow you to save and multiply your financial resources.
WHERE CAN I ISSUE AND BUY DEBT TOKENS?
In our country, activities with tokens are regulated by the state. The regulator is the High Technology Park. This agency issues the relevant permits to operators of platforms, which must meet special requirements for security, reliability, manufacturability and staff qualifications. Therefore, it is possible to legally issue and buy tokens in our country only on such platforms.
WHAT IF AN ISSUING COMPANY ISSUES TOKENS, ATTRACTS MONEY FR OM INVESTORS, AND THEN GOES BANKRUPT OR DISAPPEARS?
It is important to note here that the operators of the platforms on which issuers' tokens are sold and traded are required by the HTP to check all potential issuers for financial stability and positive business reputation. In addition, when issuing tokens, the issuer is obliged to publish and regularly update in the public domain all information about itself, as well as its financial statements.
At the same time, like any investment activity, transactions with tokens carry certain risks for investors. Therefore, before buying tokens investors should carefully study the issuer to make balanced investment decisions, try to diversify their token portfolio and invest in different companies, pay attention to those issuers who offer additional security for tokens: for example, in the form of pledge, surety or bank guarantee.
PERSPECTIVES OF DEBT TOKENE MARKET DEVELOPMENT
In the author's opinion, the development of the debt token market will gain more and more popularity. Firstly, in terms of investment opportunities, tokens are more flexible and provide much more broad prospects compared to bonds and bank deposits.
In addition, the generality of tokens will allow them to be used in areas wh ere these instruments can add new opportunities for their participants. For example, in construction, as a replacement for housing bonds. Tokenization of capital, shares, stakes in companies also has very interesting prospects.
Of course, this will require changes to the legislation regulating the construction, real estate, and securities spheres. But since the market has needs, we believe that the legal framework will take them into account.
We see a significant prospect also in the use of tokens in the cross-border movement of capital. According to our information, the existing HTP residents that currently have licences to carry out transactions with tokens may be joined by several more, including with the participation of major financial players from the Russian Federation.
This demonstrates both the already established market of fintech companies in the field of work with digital signs and the significant potential for its further development, including taking into account the development at high level of solutions for the use of cryptocurrencies and other types of digital signs (tokens) for settlements in the conditions of sanctions pressure and the entry into this market of participants from the Russian Federation.
It’s worth noting one more important point voiced by Roman Golovchenko, Chairman of the Board of the National Bank of the Republic of Belarus. At the extended meeting with the heads of Belarusian banks held on 21 March 2025, he mentioned the project to introduce a digital Belarusian ruble as well as the development of systematic approaches to regulating the sphere of tokens (digital signs) and granting banks the right to create and place their own tokens through HTP residents and to fulfil their obligations under them as significant areas of work in the near future.
This allows us to expect even more active use of debt tokens in the economy and attraction of professional players from the banking community into this sphere.
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