By Jon Rout
Further readingHKEX Connects Hong Kong and Mainland China Markets with DAML HKEX Connects Hong Kong and Mainland China Markets with DAML Digitization of Financial Market Infrastructure: Analyzing the Power of Deutsche Börse’s D7 Post-Trade Platform and the Call for Dematerialization The Evolution of Legacy Market Infrastructure LiquidShare and Digital Asset Help Shape the Future of CBDCs: Three Lessons Learned
Highlights from Digital Asset at Hong Kong Fintech Week 2021: Dematerialization, Regulation, Tokenization, Green Bonds, and Interoperability
By Jon Rout. Nov 15, 2021 11:15:32 AM
Digital Asset took the stage at Hong Kong Fintech Week, announcing our work with Goldman Sachs on its end-to-end tokenized asset infrastructure that will support the digital life cycle of multiple asset classes on permissioned and public blockchains, as well as our green bond issuance prototype built in partnership with GFT for the Bank for International Settlements (BIS) and the Hong Kong Monetary Authority (HKMA).
Throughout the event, the key theme that emerged was how tokenization of securities and digital issuance are at the forefront of change in capital markets -- for two key reasons:
Tokenizing traditional asset classes opens the door to automating corporate actions and lifecycle events - the great unsolved problem across asset classes globally;
Tokenization opens the door to provable, traceable assets - the key missing element needed to create transparency in ESG asset classes. From government green bonds to green palm oil and sustainable aluminum, tokenization done right can deliver full visibility, real-time reporting, and trust to end investors for a more sustainable and green future.
Each theme is critical to the evolution of capital markets and further highlights the power of financial technology in driving innovation for market participants: from brokers to custodians to investors, each entity has the opportunity to transact more efficiently with greater transparency and accountability to each other.
Tokenization of Regulated Securities and Digital Issuance
Many of the prototypes and customer projects Digital Asset is embarking on with Bursa Malaysia and Deutsche Börse Group address the tokenization of securities and digitization of issuances. Bursa Malaysia is testing Digital Asset’s multi-party application platform, Daml, on VMware Blockchain to automate the issuance of Structured Warrants and accelerate the Malaysian market’s journey to full dematerialization. Daml enables the issuers to create new warrants as smart contracts with unique identifiers, and register the number of shares, expiry dates, and allotments on VMware Blockchain.
Additionally, Digital Asset recently announced its work with Deutsche Börse on the D7 post-trade platform that paves an innovative future for European markets with a fully compliant, cloud-backed and DLT-ready platform that enables same-day issuance and paperless, automated STP for the entire value chain of issuance, custody, settlement, and asset servicing for digital securities.
During a virtual session with Digital Asset CEO and Co-Founder, Yuval Rooz, and Goldman Sachs’ Managing Director, Matt McDermott, Rooz stated that tokenization of securities and the processes around digital issuance of assets are critical to change in capital markets. As more jurisdictions allow for digital registration, financial services as a whole will see the door open for any asset in the world to look like a new crypto token, which enables a wealth of opportunity for all market participants.
End-to-End Tokenized Asset Infrastructure
Another major theme surrounding Hong Kong Fintech Week was the power of tokenization and getting beyond the “why”, but rather “how” tokenizing traditional assets can create greater transparency, efficiency and liquidity, ultimately driving new commercial opportunities in many markets, globally. With the recent announcement of Digital Asset supporting Goldman Sachs’ end-to-end tokenized asset infrastructure, Rooz and McDermott discussed how markets can draw inspiration from crypto through the art of tokenization so institutions can bring more assets to market with distribution characteristics of crypto (e.g. real-time trade, mobile investors, etc.). When done properly, the tokenization of traditional assets enables any person with a phone to invest in digital assets, bringing opportunities for greater financial health and freedom to global citizens.
We also participated in a session with HKEX’s Managing Director Adam Wielowieyski and Goldman Sachs’ Global Head of Digital Asset Engineering Felix Yip, and discussed the concepts of “getting tokenization done right”. The key pillars for ensuring tokenization are done right include the following:
Establish distinct rights and obligations for all parties involved
Eliminate repetitive actions across different platforms
Embed a range of lifecycle actions
Model shared workflows and automate multi-party processes
Establish compatibility across different platforms and maintain flexibility for future evolution
Meet security and privacy standards
Our panel highlighted how solutions developed with Daml seamlessly integrate with digital market infrastructure. With a tokenized asset infrastructure based on Daml, financial services firms can take advantage of the strengths of both the compliance, privacy, and control of permissioned ledger environments and greater distribution potential for public networks. Daml’s tokenization capabilities support many different use cases including equities, fixed income, green bonds, structured products, commodities, complex derivatives, carbon credits, and CBDCs.
Transparency and Accountability in Next-Generation ESG Assets
Another major focus for the Digital Asset team at Hong Kong Fintech Week was the announcement of our work with BIS and HKMA in partnership with GFT on Project Genesis, a green bond issuance platform that tracks green bond proceeds to ensure greater transparency, traceability, and corporate responsibility surrounding green finance initiatives and to eliminate green washing.
A major discussion point during the session with Digital Asset’s Associate Director for APAC Business Development, Karen Qian, was how Project Genesis leveraged Digital Asset’s interoperability protocol - Canton - to deploy its prototype networks on two different ledgers: Hyperledger Fabric and Hyperledger Besu to achieve real-time synchronization across these two ledgers while preserving the level of privacy demanded by regulated bodies.
Click here to access the full report from the Bank for International Settlements Hub and to watch the summary video describing how Digital Asset is partnering with several other entities to bring this vision of a more sustainable future to fruition.
Overall, it was an exciting week for all who attended and Digital Asset was honored to take the stage with world-recognized thought leaders in financial services. To learn more about Digital Asset’s recent announcements with Goldman Sachs’ end-to-end tokenized asset infrastructure, Bursa Malaysia’s dematerialization test with Digital Asset’s Daml framework, Deutsche Börse’s D7 post-trade platform, and the Project Genesis prototype, click here.