Real World Asset Tokenization
The Real World Asset, RWA, tokenization industry is poised for tremendous growth in the coming future. According to the Boston Consulting Group, the value captured in the on-chain RWA market is expected to reach US$16 trillion by 2030. This significant growth in the RWA market could potentially indicate US$20 billion in annual savings across global clearing and settlement costs according to the Global Financial Markets Association.
The advantages and value anticipated from RWA tokenization have certainly piqued the interest of participants in the financial industry. With increased accessibility to information about Real World Asset tokenization, clearer regulations, and advancements in technology, an increasing number of these participants are venturing into the realm of tokenization.
Let’s take a look at the key players in the financial sector who have embraced the innovation of tokenization:
JPMorgan Chase
JPMorgan Chase is one of the largest and most prominent financial institutions in the United States. It is a multinational investment bank and financial services company offering a wide range of financial services to individuals, businesses, corporations, and governments. In spite of the crypto market downturn and regulatory uncertainties, JPMorgan is committed to its plan of tokenizing traditional financial assets.
The bank has successfully processed nearly $700 billion in short-term loan transactions using its Onyx digital assets platform, which operates on a permissioned version of the Ethereum blockchain. Through this platform, customers have the ability to trade tokens that represent ownership rights to U.S. Treasuries and utilize blockchain bank accounts known as JPM Coin.
Several notable clients, including Goldman Sachs, BNP Paribas, and DBS Bank, have been utilizing the Onyx-based repo service. Moreover, an additional fifteen banks and broker-dealers are interested in joining the platform, according to Tyrone Lobban, the head of Onyx, in an interview with CoinDesk.
As the Onyx platform continues to expand, its focus will shift towards tokenizing assets that are traditionally difficult to finance, such as money-market funds, which will then be used as collateral. Lobban also anticipates that Onyx will eventually issue a broader range of blockchain-based assets, including private funds, as the platform progresses.
Source(s):
Tokenization Is 'Killer App' for TradFi: JPMorgan
https://finance.yahoo.com/news/tokenization-killer-app-tradfi-jpmorgan-123704070.html
JPMorgan’s Onyx Platform
https://www.jpmorgan.com/onyx/index
Monetary Authority of Singapore’s Project Guardian
Project Guardian is a collaborative initiative by the Monetary Authority of Singapore with the financial industry that seeks to test the feasibility of applications in asset tokenization and DeFi while managing risks to financial stability and integrity.
The objectives of the project are to conduct industry pilots with traditional financial institutions and FinTechs to understand opportunities and risk areas, assess the longer-term transformational impact and aim for the safe development of the ecosystem using industry experiments and research as a reference as well as establish policy guidelines and framework in order to define acceptable governance model or accountability; technical standards for regulated DeFi.
Current pilots for the project include:
- Global Liquidity Pool
DBS Bank, JP Morgan and SBI Digital Asset Holdings conducted foreign exchange and government bond transactions against liquidity pools comprising tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD). A live cross-currency transaction involving tokenized JPY and SGD deposits was successfully conducted. In addition, a simulated exercise was performed involving the buying and selling of tokenized government bonds.
- Trade Finance
Standard Chartered Bank is leading an initiative to explore the issuance of tokens linked to trade finance assets. The project aims to digitize the trade distribution market, by transforming trade assets into transferable instruments that are more transparent and accessible to investors.
- Wealth Management
HSBC and UOB are working with Marketnode to enable native digital issuance of wealth management products, enhancing issuance efficiency and accessibility for investors.
Source(s):
MAS Project Guardian
https://www.mas.gov.sg/schemes-and-initiatives/project-guardian
Standard Chartered
Standard Chartered is a multinational banking and financial services company headquartered in London, England. Standard Chartered operates a network of branches and offices across more than 60 countries, with a particular focus on Asia, Africa, and the Middle East. As a leading international bank, Standard Chartered offers a range of financial services to individuals, corporations, and institutions.
Standard Chartered has made an investment in Contour, an open industry platform based on blockchain technology. The primary focus of this platform is to facilitate the digital creation, exchange, approval, and issuance of Letters of Credit (LCs).
By utilizing this platform, the traditional and paper-intensive processes of documentary trade have been transformed. The entire lifecycle of LCs, including issuance, confirmation, and presentation of documents, has been digitized. This allows all participants in a trade transaction to have real-time visibility into the progress of their transactions. Standard Chartered conducted two live pilots with major clients in the petrochemicals industry, one in Thailand and the other in Singapore. These pilots demonstrated several benefits, including increased transparency, improved cost efficiencies, reduced settlement risks along the supply chain, and faster access to working capital.
In the next phase of Contour's development, the platform aims to expand its ecosystem by including more banks, technology providers, and established trade finance networks. The long-term vision is for Contour to become the industry standard for digitizing global trade. To support this vision, Standard Chartered will contribute its smart guarantee capabilities, which will enable the digitization of the bank guarantee process from initiation to claim handling.
In addition, Standard Chartered has used tokenization technology in supply chain financing transactions with Linklogis in China starting back in 2019. By digitizing invoices and issuing tokens on a blockchain, deep-tier suppliers were able to access affordable financing based on the credit rating of the anchor buyer.
Source(s):
Standard Chartered’s Contour
Standard Chartered to tokenize trade finance in Singapore digital asset pilot
HSBC
HSBC, also known as HSBC Holdings PLC, is a multinational banking and financial services organization based in London, United Kingdom. It is one of the largest banking and financial services institutions globally, serving millions of customers across various countries and regions.
As part of Project Guardian, HSBC, in collaboration with Marketnode and UOB, is developing a distributed ledger technology (DLT)-enabled infrastructure for wealth management products. This initiative aims to transform the current paper-based processes involved in issuing, securitizing, distributing, and servicing wealth management products like structured notes and actively managed certificates (AMCs).
By leveraging DLT, the infrastructure seeks to fully digitalize the entire value chain of wealth management products. This includes streamlining issuance, securitization, distribution, and asset servicing processes. The implementation of DLT has the potential to significantly reduce the time required to manufacture and distribute products and funds, decrease issuance and servicing costs, and improve the accessibility and transparency of these products.
The collaboration between HSBC, Marketnode, and UOB aims to create a future-ready infrastructure that will support the expansion of inclusive wealth management products in Singapore. This development holds the potential to enhance the efficiency and competitiveness of Singapore's asset management industry, which has assets totalling S$5.4 trillion.
Moreover, in February 2023, the European Investment Bank (EIB), along with leading banks BNP Paribas, HSBC, and RBC, successfully completed the first-ever issuance of a sterling bond using blockchain technology. The bond was valued at £50 million and had a maturity of three years, with a floating interest rate based on the Sonia (Sterling Overnight Index Average) plus 12 basis points. Institutional investors and bank treasuries were allocated the bond through this blockchain-based issuance process.
Source(s):
HSBC, Marketnode, and UOB partner on fully digital issuance of wealth products
HSBC Orion tokenizes commercial bank money and sterling bonds
DBS Bank
DBS refers to DBS Bank Ltd, a multinational banking and financial services corporation headquartered in Singapore. DBS is one of the largest banks in Southeast Asia and operates across various markets, including Singapore, Hong Kong, China, India, Indonesia, Taiwan, and others.
DBS launched a tokenized bond platform called DBS Digital Exchange, DDEx in December 2020. The platform allows institutional investors to trade tokenized bonds on a blockchain network. In 2021, DBS released its first-ever Security Token Offering (STO) on the DBS digital exchange. The issuance, valued at US$11 million, represents a key step in the bank's asset digitalization strategy and aligns with the growing trend of asset tokenization.
In an STO, digital tokens are issued as regulated securities using blockchain technology. These tokens serve as digital representations of Real World Assets, granting ownership or economic rights, such as profit sharing or asset ownership, to investors.
DBS' inaugural STO involved the issuance of a fixed-income token for a privately placed DBS bond. The bond had a six-month maturity period and a coupon rate of 0.60% per annum, with coupons paid in cash directly into investors' accounts. The STO received a full subscription, serving as a model for other companies seeking to raise capital by tokenizing their securities and assets.
Source(s):
DBS Bank tapping into tokenized bonds as a new way to invest
https://forkast.news/dbs-singapore-digital-bond-security-token-offering-tokenization-asia/
ANZ Bank
ANZ Bank, officially known as Australia and New Zealand Banking Group Limited, is one of the largest banking and financial institutions in Australia and New Zealand. It operates as a multinational bank, providing a comprehensive range of banking and financial services to individuals, businesses, and institutional clients.
In April 2023, ANZ Bank announced the successful completion of a project in Australia's central bank digital currency (CBDC) trials. As part of the pilot program led by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre (DFCRC), ANZ participated in four out of fifteen use cases. One of these use cases involved the use of ANZ's A$DC stablecoin to settle transactions involving tokenized carbon credits.
ANZ collaborated with Grollo Carbon Ventures, an Australian company specializing in carbon finance and sustainable investments, to facilitate the trading of Australian Carbon Credit Units (ACCUs). The bank tokenized existing ACCUs and issued its stablecoin, A$DC, allowing Grollo Carbon Ventures to purchase tokenized ACCUs. The settlement of the transaction occurred in near real-time using ANZ's smart contracts on a public, permissionless blockchain. This demonstration showcased the use of digital assets to reduce settlement time and mitigate settlement-related counterparty risk.
This project builds upon ANZ's ongoing tokenization initiatives. In June 2022, A$DC was utilized in a landmark transaction where it was used to purchase tokenized carbon credits. The transaction involved the private investment firm Victor Smorgon Group, who used A$DC to acquire tokenized ACCUs from the carbon credit tokenizing and trading platform BetaCarbon. This transaction aimed to test the feasibility of using the stablecoin in carbon abatement instruments.
Source(s):
ANZ and Grollo partner to trade tokenized Australian Carbon Credit Units
ANZ completes CBDC pilot for tokenized carbon credits
https://www.ledgerinsights.com/anz-cbdc-pilot-tokenized-carbon-credits/
ANZ Bank’s Stablecoin Used To Purchase Tokenized Carbon Credits
https://blockworks.co/news/anz-banks-stablecoin-used-to-purchase-tokenized-carbon-credits
BNP Paribas
BNP Paribas is a renowned French multinational banking and financial services company. It is considered one of the largest and most influential banks in Europe, with a global presence and a wide range of offerings. BNP Paribas operates in multiple regions, including Europe, the Americas, Asia-Pacific, the Middle East, and Africa.
In July 2022, BNP Paribas (BNPP) successfully facilitated the structuring and tokenization of a project finance bond on the Ethereum blockchain. The bond proceeds were specifically allocated to finance solar energy projects in collaboration with EDF ENR, an organization focused on assisting businesses and individuals in the installation of solar panels. Various divisions within BNP Paribas played crucial roles in this initiative. BNP Paribas CIB participated in the issuance process utilizing the bank's own tokenization platform called AssetFoundry. BNP Paribas Securities Services took charge of managing the custody aspects, while BNP Paribas Asset Management made the purchase of the bond.
Source(s):
BNP Paribas issues tokenized bond for EDF on the public blockchain
https://www.ledgerinsights.com/bnp-paribas-issues-tokenized-bond-for-edf-on-public-blockchain/
BNP Paribas embraces tokenization for project finance bonds
Taurus, Credit Suisse and Deutsche Bank
Taurus, a Switzerland-based platform specializing in digital asset infrastructure, has successfully integrated Polygon, a Layer-2 network, into its custody and tokenization platforms known as Taurus-PROTECT and Taurus-CAPITAL. This integration enables Taurus to provide its clients, including traditional financial institutions, with the ability to tokenize various Real World Assets and manage them through a fully automated process.
Taurus serves as a provider of tokenization and crypto asset management services, offering comprehensive solutions in the digital asset space. The integration with Polygon enhances Taurus' capabilities and extends its reach in facilitating the tokenization of assets.
Notably, Taurus has received support from prominent European banking giants, Credit Suisse and Deutsche Bank. Both institutions participated in Taurus' recent fundraising round in February 2023, contributing to the company's successful capital raise of US$65 million.
Source(s):
Credit Suisse, Deutsche Bank-Backed Taurus Deploys on Polygon Blockchain
Taurus links up with Polygon to tokenize real-world assets for TradFi
https://cryptoslate.com/taurus-links-up-with-polygon-to-tokenize-real-world-assets-for-tradfi/
Hong Kong Central Bank
The Hong Kong Monetary Authority (HKMA) launched its inaugural e-HKD Pilot Program, which aims to explore various use cases for the e-HKD digital currency across six categories. These categories include full-fledged payments, programmable payments, offline payments, tokenized deposits, settlement of Web3 transactions, and settlement of tokenized assets. The program will conduct a series of pilots with industry players to gain in-depth insights into the implementation, application, and design aspects of the e-HKD.
To prepare for the potential rollout of the e-HKD, the HKMA has adopted a three-rail approach and partnered with Ripple, along with its partners such as Fubon Bank, to demonstrate the use case of the e-HKD Pilot Program. The focus will be on real estate asset tokenization and equity release utilizing the e-HKD.
In a separate development, the Hong Kong government successfully issued its first tokenized green bond worth HKD 800 million (US$101 million) in February 2023. This bond, offered under the government's Green Bond Program, marks the first instance of a government issuing a green bond globally. The 365-day bond, with a yield of 4.05%, was issued in collaboration with the Bank of China (Hong Kong), Crédit Agricole CIB, and HSBC, with Goldman Sachs serving as the platform provider.
Source(s):
Hong Kong Successfully Offered Inaugural $100M Tokenized Green Bond
Ripple to Showcase Real Estate Asset Tokenization Solution as part of the Hong Kong Monetary Authority’s Inaugural e-HKD Pilot Programme
Goldman Sachs
Goldman Sachs is a multinational investment bank and financial services company. It was founded in 1869 and is headquartered in New York City. Goldman Sachs offers a wide range of financial services to corporations, governments, institutions, and individuals. These services include investment banking, securities trading, asset management, risk management, and various other financial advisory services. Goldman Sachs is known for its expertize in mergers and acquisitions, underwriting of securities, and its involvement in global capital markets. It is considered one of the leading investment banks globally and has a significant presence in the financial industry.
Goldman Sachs unveiled its proprietary tokenization platform called GS DAP, which leverages Digital Asset's Daml smart contract language and Canton blockchain, offering enhanced privacy capabilities. GS DAP, like other tokenization platforms built on Daml, effectively captures the intricate details of rights, obligations, and cash flows associated with assets throughout their entire lifecycle. Furthermore, it facilitates seamless access and automation of digital representations and workflows across interconnected networks of participants. The privacy protocols implemented by Digital Asset ensure that data is selectively shared only with authorized stakeholders, while simultaneously ensuring scalability to enable global asset connectivity.
In November 2022, Goldman Sachs partnered with the European Investment Bank (EIB) to launch a groundbreaking digital bond denominated in euros. This pioneering initiative involved issuing, recording, and settling a 100 million euro, two-year bond using private blockchain technology. The successful launch of this bond marked the debut issuance of Goldman Sachs' tokenization platform. By leveraging blockchain technology, investors were able to purchase and pay for the security tokens using conventional currency, introducing a novel approach to bond issuance facilitated by the EIB.
Source(s):
EIB launches second euro digital bond with Goldman, SocGen
https://www.reuters.com/markets/rates-bonds/eib-launches-second-euro-digital-bond-2022-11-29/
Goldman Sachs’ Tokenization Platform GS DAP™, Leveraging Daml, Goes Live
https://sg.finance.yahoo.com/news/goldman-sachs-tokenization-platform-gs-130000514.html
Nomura
Nomura is a global financial services group based in Japan. It is one of the largest investment banks in the world and provides a wide range of financial services to individuals, corporations, financial institutions, and governments. Nomura's services include investment banking, asset management, retail brokerage, research, and trading of securities. The company has a significant presence in Asia, with headquarters in Tokyo and offices in various countries around the world. Nomura is known for its expertise in areas such as mergers and acquisitions, underwriting of securities, and equity research.
In February 2023, Nomura's digital asset subsidiary, Laser Digital, made a strategic investment in Infinity Exchange, a decentralized finance (DeFi) protocol designed for institutional-grade financial activities. Infinity, founded by Kevin Lepsoe, the former Head of Structuring at Morgan Stanley, is an innovative interest rate protocol that serves as the foundation for benchmark rates and facilitates institutional-level lending, borrowing, and risk management within the DeFi space. Infinity Exchange, the initial component of a series of planned infrastructures, offers inter-exchange clearing, fixed and floating rate markets, as well as enterprise-grade risk management. It employs a hybrid on-chain/off-chain infrastructure that ensures transaction efficiency, security, and scalability. The team at Infinity comprises experts in structuring, quantitative development, and financial engineering who have prior experience at global financial institutions such as Morgan Stanley, Citigroup, and PIMCO.
Furthermore, in September 2022, Nomura disclosed its investment in Fnality, a blockchain-based interbank payment and settlement platform. Formerly known as the Utility Settlement Coin, Fnality tokenizes central bank-issued money to facilitate the settlement of distributed ledger technology (DLT) transactions using on-chain digital currency.
Source(s):
Nomura’s Crypto Arm Invests in Institutional Hybrid DeFi Protocol Infinity Exchange
https://www.coindesk.com/business/2023/02/15/nomuras-crypto-arm-invests-in-institutional-hybrid-defi-protocol-infinity-exchange/
Nomura's Laser Digital Invests in DeFi Protocol Infinity to Accelerate Hybrid Finance
https://www.nomuraholdings.com/news/nr/europe/20230215/20230215.html
Nomura invests in Fnality's institutional blockchain payments platform
https://www.ledgerinsights.com/nomura-fnality-institutional-blockchain-payments-digital-currency/
WisdomTree
WisdomTree is an investment management firm that specializes in exchange-traded funds (ETFs) and exchange-traded products (ETPs). Founded in 2006, WisdomTree offers a wide range of investment strategies across various asset classes, including equities, fixed income, currencies, and commodities. The company is known for its innovative approach to indexing, which incorporates factors such as dividends, earnings, and valuation metrics to construct its ETFs. WisdomTree has a global presence, with offices in the United States, Europe, and Asia, and provides investment solutions to institutional and individual investors. The firm aims to provide investors with cost-effective, transparent investment options aligning with their specific investment goals and strategies.
In September 2022, the $75 billion asset manager introduced the Short-Term Treasury Digital Fund (WTSY) in September 2022. This fund utilizes blockchain technology, specifically the Ethereum or Stellar blockchains, to digitize the ownership records of its fund shares. The WTSY fund is designed to track the Solactive one to three-year Treasury index. Notably, WTSY is the first open-end fund that allows for the tokenization of share records on either the Ethereum or Stellar blockchains, as confirmed by WisdomTree. It is important to note that the fund operates on a blockchain infrastructure but does not invest in any cryptocurrencies. This offering represents a significant advancement in bringing traditional financial assets into the digital ecosystem. Investors will have the opportunity to purchase the fund through WisdomTree Prime, the firm's blockchain-based digital wallet.
Source(s):
WisdomTree to Launch its First Blockchain-Enabled Fund
https://www.marketsmedia.com/wisdomtree-to-launch-its-first-blockchain-enabled-fund/
WisdomTree: WTSY - The Digital Fund Opportunity
https://www.wisdomtree.com/investments/blog/2022/09/26/wtsy-the-digital-fund-opportunity
Swift
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network and cooperative organization that facilitates secure and standardized communication between financial institutions worldwide. It provides a platform for financial institutions to exchange information and instructions related to financial transactions, such as payments, securities, and trade finance. SWIFT enables banks, brokerages, corporations, and other financial entities to securely transmit messages, confirmations, and instructions across borders. It plays a crucial role in facilitating international financial transactions, ensuring accuracy, security, and efficiency in the global financial system. SWIFT assigns unique codes (e.g., BIC or SWIFT codes) to identify each member institution, allowing for smooth and standardized communication between participants.
In June 2023, SWIFT partnered with numerous prominent financial institutions and FMIs, including ANZ, BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyds Banking Group, SDX, and DTCC, to conduct experiments that explore the potential of leveraging SWIFT's existing infrastructure for efficient transfer of tokenized value across public and private blockchain networks. Chainlink, a leading Web3 services platform, will provide connectivity across these blockchain networks for the experiments. The collaboration aims to demonstrate how SWIFT's infrastructure can enable interoperability, facilitating the transfer of tokenized value between existing systems and both public and private distributed ledger technology (DLT) platforms, utilizing existing connectivity, standards, and messaging.
The first use case focuses on transferring tokenized assets between two wallets on the same public blockchain network (Ethereum Sepolia testnet). The second involves transferring tokenized assets from a public blockchain (Ethereum) to a permissioned blockchain. The third use case tests transferring tokenized assets from Ethereum to another public blockchain. Chainlink will act as an enterprise abstraction layer, securely connecting the SWIFT network with the Ethereum Sepolia network, while Chainlink's Cross-Chain Interoperability Protocol (CCIP) will ensure complete interoperability between the source and destination blockchains.
This collaboration is not SWIFT's first foray into tokenization. In October 2022, SWIFT collaborated with Citi, Clearstream, Northern Trust, and SETL to assess how their existing infrastructure could serve as a single access point to multiple tokenization platforms. The experiments successfully simulated 70 scenarios involving market issuance and secondary market transfers of tokenized bonds, equities, and cash. The results demonstrated that SWIFT can serve as a unified entry point to various tokenized networks, with their infrastructure enabling the creation, transfer, and redemption of tokens while updating balances across multiple client wallets.
Source(s):
Swift explores blockchain interoperability to remove friction from tokenized asset settlement
Swift: Connecting digital islands: Paving the way for global use of CBDCs and tokenized assets
OCBC Bank
OCBC (Oversea-Chinese Banking Corporation) is a multinational banking and financial services corporation headquartered in Singapore. It is one of the largest financial institutions in Southeast Asia. OCBC provides a comprehensive range of banking services, including retail banking, corporate banking, treasury and markets, wealth management, and insurance. The bank serves individuals, small and medium-sized enterprises (SMEs), and large corporations. OCBC operates through a network of branches and offices in various countries, with a significant presence in Singapore, Malaysia, Indonesia, China, and Hong Kong.
OCBC Bank and MetaVerse Green Exchange (MVGX), a digital green exchange regulated by the Monetary Authority of Singapore, formed a strategic partnership in April 2022. The objective of this collaboration is to develop innovative green financing solutions that facilitate large corporations' transition to carbon neutrality.
The financing solutions will incorporate tokenized carbon credits in the form of MVGX's Carbon Neutrality Tokens (CNTs). These tokens will allow large corporations to offset their carbon emissions, simplifying their path towards achieving carbon neutrality. An independent party will verify the expected carbon emissions from projects supported by these financing solutions, enabling the calculation of the corresponding carbon credits required.
MVGX's CNTs are built on the company's Non-Fungible Digital Twin (NFDT) distributed ledger technology. This technology provides corporates with a verifiable and constantly updated record of the carbon performance of the climate-action projects they have invested in through these digital carbon credits.
In another tokenization effort, OCBC announced a long-term partnership with blockchain digital asset marketplace ADDX in June 2023. As part of this collaboration, OCBC issued a tokenized equity-linked structured note on the ADDX platform. Accredited investors can invest in this note, which is linked to shares of a US-listed technology giant (referred to as the "Underlying Share"). The three-month note offers a fixed coupon and allows investors to benefit from price movements in the equity while receiving additional cash flow. The minimum investment size for the note on the ADDX platform is set at US$50,000.
Source(s):
OCBC Bank enters partnership with digital exchange ADDX; the first product launched is a tokenized equity-linked structured note
OCBC to provide corporates with tokenized carbon credits
https://www.finextra.com/pressarticle/92379/ocbc-to-provide-corporates-with-tokenized-carbon-credits
BOCI
BOCI is a fully-owned investment bank under the Bank of China, offering a comprehensive array of investment banking services to both domestic and international clients. These services encompass corporate finance, mergers and acquisitions, financial advisory, securities sales, fixed income, private banking, asset management, direct investment, equity derivatives, leveraged and structured finance, global commodities, and more. Over an extended period, BOCI has maintained a prominent position in various markets, including Hong Kong's initial public offerings (IPOs), stock trading, bond issuance, Mandatory Provident Fund (MPF), as well as capital markets in mainland China.
In June 2023, BOCI became the inaugural Chinese financial institution to issue tokenized securities in Hong Kong by launching fully digital structured notes valued at 200 million offshore renminbi (US$28 million) on the Ethereum blockchain. UBS played a crucial role in originating the product and distributing it to its clients in the Asia Pacific region, demonstrating a longstanding partnership between BOCI and UBS in the realm of digital structured notes. This milestone transaction represents a significant advancement in terms of applicable regulations and blockchain technology. It stands as the first-of-its-kind product in the Asia Pacific region, complying with both Hong Kong and Swiss law, and tokenized on the Ethereum blockchain.
Source(s):
BOCI issued first tokenized notes, originated by UBS and placed to its clients in Hong Kong
https://www.ubs.com/global/en/media/display-page-ndp/en-20230609-tokenized-notes.html
Bank of China's BOCI issues first tokenized security in Hong Kong on Ethereum
https://www.theblock.co/post/234241/bank-of-china-boci-tokenized-security-ethereum
UBS
UBS is a multinational investment bank and financial services company headquartered in Switzerland. It is one of the world's largest and most respected financial institutions, offering a wide range of services to individuals, corporations, and institutions globally. UBS provides services in areas such as wealth management, investment banking, asset management, and retail banking.
On top of issuing tokenized structured notes alongside BOCI, in December 2022, UBS's London branch made a significant move by issuing $50 million in digital fixed-rate security tokens using blockchain technology. These tokens were distributed to a range of high-net-worth individuals, global families, and institutional wealth investors in Hong Kong and Singapore. This groundbreaking issuance represented the first time that uncertificated securities had been created under English and Swiss law and tokenized on a permissioned Ethereum-based blockchain. The securities, denominated in US dollars, had a maturity of six months and were tokenized on a secure and controlled blockchain network.
In another milestone, UBS successfully launched its inaugural senior unsecured digital bond in November 2022. This three-year bond, denominated in Swiss francs and carrying a 2.33% coupon, was traded and settled on a regulated exchange. The unique feature of this digital bond was its ability to be settled via the SIX Digital Exchange (SDX) distributed ledger-based central securities depository (CSD) network. Using atomic settlement technology, investors were able to automatically settle and clear the UBS digital bond either directly on the SDX CSD or through SIX SIS.
Source(s):
UBS issues US$50 million tokenized debt securities
https://www.theasset.com/article/48333/ubs-issues-us-50-million-tokenized-debt-securities
UBS AG launches the world’s first digital bond that is publicly traded and settled on both blockchain-based and traditional exchanges
https://www.ubs.com/global/en/media/display-page-ndp/en-20221103-digital-bond.html
NongHyup Bank
NongHyup, also known as the National Agricultural Cooperative Federation, is a South Korean agricultural cooperative bank. It provides a range of financial services to support the agricultural sector, rural communities, and the overall development of the country's economy. NongHyup offers services such as banking, insurance, credit, loans, and investment products tailored to the specific needs of farmers, rural residents, and agricultural businesses.
In April 2023, NongHyup established a bank consortium with the objective of building an ecosystem focused on security tokens, known as STOs, Security Token Offerings. The consortium consists of 18 members, including institutions and companies such as Hana Bank, Shinhan Bank, Woori Bank, Funble, Trackchain, and Artipio, among others. Projections indicate that the STO market could reach 34 trillion won (approximately US$26.6 billion) by 2024. The consortium's primary goal is to find ways for banks to enter the STO market while complying with regulatory requirements. Their collaborative efforts will involve developing platforms for issuing tokenized securities and establishing an ecosystem where companies can issue tradable corporate bonds in the form of security tokens.
NongHyup had previously announced a partnership with blockchain firm Hexlant and Pacific Law back in June 2020 to explore new business models related to digital asset custody and security. This collaboration aimed to delve into the potential surrounding digital asset management.
Source(s):
Top South Korean banks gear up for a $27B security token market
https://blockworks.co/news/south-korea-security-tokens
South Korea’s NH Bank creates digital asset consortium
https://www.ledgerinsights.com/south-koreas-nh-bank-creates-digital-asset-consortium/
Mastercard
Mastercard is a multinational financial services corporation that operates as a payment technology company. It is one of the world's largest payment processing networks, facilitating electronic fund transfers and transactions globally. Mastercard provides payment solutions and services to consumers, businesses, and financial institutions. It offers a wide range of products, including credit cards, debit cards, prepaid cards, and contactless payment solutions.
In June 2023, Mastercard unveiled the initial version of its Multi-Token Network (MTN), signalling its commitment to developing practical applications and use cases in collaboration with financial institutions, fintech companies, and central banks. MTN will serve as a testing ground for innovative solutions, paving the way for broader implementation across global markets through partnerships with additional stakeholders. Mastercard aims to attract developers to leverage its permissioned blockchain, which offers significant potential for transforming its payment capabilities. The first wave of applications will leverage "tokenized bank deposits," as stated by Raj Dhamodharan, Mastercard's leader in crypto and blockchain products. The company is extending invitations to multiple banks and financial institutions to participate, with plans to expand MTN's scope to encompass central bank digital currencies and regulated stablecoins in the future.
Source(s):
Mastercard to continue crypto foray with beta launch of ‘blockchain app store’
https://blockworks.co/news/mastercard-blockchain-app-store-beta
Mastercard is Piloting Tokenized Bank Deposits in New UK Testbed
Paypal
PayPal is a widely recognized online payment platform that enables individuals and businesses to make electronic transactions and money transfers over the internet. It provides a convenient and secure way to send and receive payments, make online purchases, and manage funds without the need to share sensitive financial information with recipients. PayPal supports various payment methods, including credit and debit cards, bank accounts, and PayPal balances. It has become a popular solution for e-commerce, online shopping, and peer-to-peer money transfers.
In August 2023, Paypal announced its launch of PayPal USD, PYUSD. PYUSD is a stablecoin that is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars. It is issued by Paxos Trust Company. As an ERC-20 token issued on the Ethereum blockchain, PayPal USD will be available to an already large and growing community of external developers, wallets and web3 applications, can be easily adopted by exchanges, and will be deployed to power experiences within the PayPal ecosystem. PYUSD holders will be able to transfer, fund purchases and convert between PYUSD and other PayPal-supported cryptocurrencies.
Source(s):
PayPal Launches U.S. Dollar Stablecoin
https://newsroom.paypal-corp.com/2023-08-07-PayPal-Launches-U-S-Dollar-Stablecoin
Bank of Italy
The Bank of Italy (Banca d'Italia) is the central bank of the Republic of Italy. Its primary functions include issuing the euro currency, implementing monetary policy, and supervising and regulating banks and financial institutions in Italy. The Bank of Italy is a key institution within the Eurosystem, which comprises the central banks of the eurozone countries and is responsible for formulating and implementing the single monetary policy for the euro. It also plays a role in safeguarding the stability and integrity of the Italian financial system and contributing to the economic well-being of the country.
The Bank of Italy's Milano Hub innovation centre will offer assistance to a project crafted by Cetif Advisory, aimed at exploring an institutional decentralized finance (DeFi) ecosystem for security tokens. The project's primary goal is not commercialization but rather an expansion of the analysis scope regarding security tokens on secondary markets. These tokens are digital representations of ownership in real-world assets.
The initiative aims to enable institutional market participants to engage within a DeFi environment while adhering to regulatory directives. It will additionally enhance Cetif Advisory's Lionity platform, characterized as an "institutional-grade automated market maker." Cetif Advisory is an offshoot of the Cetif Research Centre at Università Cattolica del Sacro Cuore in Milan. The project is a collaborative effort involving Polygon Labs, Fireblocks, and other entities. Italian banks, asset management firms, and 10 other financial institutions will participate in this endeavour.
Source(s):
Italian central bank backs DeFi tokenization project with Polygon, Fireblocks
Brazil Securities and Exchange Commission
Brazil's Comissão de Valores Mobiliários (CVM) is the country's equivalent of the Securities and Exchange Commission (SEC) in the United States. It is the regulatory body responsible for overseeing and regulating Brazil's securities and financial markets. CVM's role includes supervising the issuance and trading of securities, protecting investors, ensuring the transparency and efficiency of financial markets, and enforcing securities regulations in Brazil. It plays a crucial role in maintaining the integrity and stability of Brazil's financial and investment environment.
Brazil's Securities and Exchange Commission (CVM) has revealed its intentions to initiate a second regulatory sandbox initiative in 2024. This upcoming sandbox program is designed to delve into the diverse applications of tokenization. It is anticipated that this step will draw interest from both well-established financial entities and startups keen on harnessing the opportunities presented by tokenized assets. The CVM aims to offer a secure and monitored setting for these innovators to experiment with this technology, all while being shielded from the comprehensive set of regulations that typically oversee the industry.
Source(s):
Brazil's Regulatory Authority CVM Plans to Launch Tokenization Program Sandbox in 2024
Conclusion
RWA tokenization offers a promising path towards transforming the ownership, transfer, and financing of traditional assets. The active involvement of renowned financial institutions underscores the growing interest and exploration in this field.
Through the digitization of physical assets and their representation as tokens on the blockchain or distributed ledger platforms, asset tokenization brings forth numerous advantages. These include increased liquidity, better accessibility, enhanced efficiency, and improved transparency. The process allows a broader range of investors to access assets that were previously illiquid. Additionally, it simplifies complex processes like trading and settlement.
However, the widespread adoption of asset tokenization still faces challenges related to regulations, legal frameworks, technological infrastructure, and industry standards. To overcome these hurdles, collaboration between financial institutions, technology providers, regulators, and stakeholders is essential to establish reliable networks and create a secure and standardized ecosystem for asset tokenization.
As the field continues to evolve, it is crucial for market participants to stay informed about the latest developments, regulatory changes, and advancements in technology. Real World Asset tokenization has the potential to reshape traditional finance and unlock new opportunities for asset owners, investors, and the broader financial ecosystem. We believe the adoption of Real World Asset tokenization will drive the mainstream adoption of cryptocurrency.
About CitaDAO
CitaDAO.io is a Decentralized Finance (DeFi) platform for Real Estate to be tokenized on-chain, built on the Ethereum ecosystem. CitaDAO aims to solve the lack of liquidity, access limitation, and lack of composability in existing real estate ecosystem by creating interoperability with other DeFi applications/primitives that operate on the Ethereum protocol. Real estate token allows the community to diversify their portfolio on-chain to generate stable yield through real world assets that have constant liquidity through AMM — interested to learn more?
Follow us on Twitter: @citadao_io
Join our community on Discord: bit.ly/citadao
Or check out our website: citadao.io
Disclaimer: The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. This communication should not be relied upon or the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy
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