The Rise of Security Token Exchanges
25 Februar 2022 - 9:22AM
NEWSBTC
Many countries are looking to dematerialize their financial
markets, switching from physical to digital securities tracking
using blockchain technology. For issuers, digital securities make
global issuance cheaper and more efficient, while streaming
business operations with smart contracts. On the investor’s side,
digital securities grant access to a larger pool of investment
opportunities while reducing settlement fees and times The Race to
Become a Security Token Exchange Intercontinental Exchange (ICE),
the owner of the New York Stock Exchange (NYSE), revealed digital
currency exchange Bakkt in 2019 – “Bakkt” being a play on words for
“backed”, or “asset-backed securities”. Bakkt’s focus is warming
Wall Street to the idea of virtual currency trading and acting as a
scalable crypto on-ramp. However, its development is still ongoing
and is slated for completion in 2023. In Australia, the Australian
Securities Exchange (ASX) teamed up with leaders in the
cryptocurrency space to move its current exchange platform onto
distributed ledger technology. Today, it offers distributed ledger
technology as a service to clients, who enjoy the benefits of
better data accessibility and smart contract-assisted optimized
workflows. Asia and Canada, too, see traditional exchanges
exploring the digital asset space. The Hong Kong Exchange and
Clearing Limited (HKEX) recently launched Synapse, distributed
ledger technology-assisted service that facilitates the movement
and ownership management of securities post-purchase. Meanwhile,
the Canadian Securities Exchange (CSE) launched a settlement
platform and promotes the use of Security Token Offerings
(STOs), which many companies have used as semi-regulated and
accelerated paths to market. On the cryptocurrency side, major
exchanges have also noticed the latent potential of digital
securities. With blockchain technology already in place, they are
competitively positioned to corner the market. While operating in
the largely unregulated cryptocurrency space, they have been slowly
accumulating the licenses needed to exchange traditional securities
on-chain. Cryptocurrency giant Binance caught the attention of
global regulatory agencies in mid-2021 when it began offering a
product it called “stock tokens”, tokens whose values were pegged
to publicly traded stocks. After being threatened with severe legal
action for dealing in securities without being appropriately
licensed to do so, Binance ceased their sale. Binance CEO Changpeng
“CZ” Zhao then announced Binane’s plans to become a fully regulated
financial institution. As described by Quinlan & Associates,
Huobi and Coinbase, having already secured broker-dealer licenses
regulated by the SEC and FINRA, are on their way to offering
security tokens as well, cementing the inevitability of security
tokens as a major market force. Security Token Exchanges Landscape
However, both traditional and cryptocurrency exchanges face major
challenges in their transitions. Traditional exchanges are held
back by legacy technology and paper-based securities.
Cryptocurrency exchanges may experience difficulty in changing
their brand perception from cryptocurrency specialists to digital
asset generalists. In response, new digital asset broker-dealers,
sometimes called blockchain exchanges, have been entering the
space. Some examples of which are Archax, the first security token
exchange to be regulated by the Financial Conduct Authority in
London; tZERO, an SEC-regulated alternative trading system offering
digital asset trading; and INX, a trading platform for regulated
security tokens and cryptocurrencies. Still, blockchain exchanges
face problems of their own. Most are established by cryptocurrency
enthusiasts unfamiliar with licensing, and as such are lacking in
licensing when compared to traditional exchanges. This leaves a
void, or industry white space, for financial organizations with
both high digital capabilities and full licensing. Positioned to
fill that white space, Fusang, founded in Malaysia in 2015, is
Asia’s first fully-licensed digital securities exchange. Fusang
offers a platform for global investors to invest in digital
securities through on-chain digitization of real-world assets
including shares, bonds, and funds. The platform includes various
products intended for the easy management of digital assets.
Fusang’s exchange excels where traditional asset exchanges fall
short – technology, fulfillment, product access, and market access.
Fusang Vault is a secure and fully-licensed custodial service
provider that protects clients’ assets from external threats.
Lastly, Fusang Digital Identity is a digital user ID that can be
leveraged in a modularized and scalable manner. Fusang provides a
one-stop client onboarding service, which includes KYC, AML, and a
risk-based assessment to speedily onboard retail and corporate
clients with minimal friction.
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