By Bill Taylor, Contributor
Here’s another example of what’s going on in the ‘real world’ (the world outside the regulatory confines of the U.S.) and the speed at which financial technology is advancing. The principal stock exchange in Switzerland (SIX Swiss Exchange) is rapidly developing a blockchain based platform that will allow the tokenization of traditional securities. The project nicknamed SIX Digital Exchange (SDX) will operate on a distributed ledger utilizing the exchange’s technical expertise to scale up the infrastructure needed to satisfy traders and investors. The SDX will be a fully regulated trading platform offering the “same standard of oversight and regulation” when operational and will be overseen by the Swiss financial regulators.
The parent exchange plans to roll out the SDX in phases with the first phase targeted for mid-2019. “The first step is to build up a regulated exchange platform. In a second phase we will offer the service to tokenize existing bankable assets which will be followed by the tokenization of non-bankable assets.” The SDX is not looking to trade cryptocurrencies but rather provider a regulated platform where traditional investors can list assets that have been tokenized.
Tokenization is the fastest growing segment in the world’s capital market infrastructure. It is basically the digitization of assets and financial instruments. There is nothing that can’t be digitized (well, probably not wife and kids) thus lowering costs, increasing mobility, offering increased liquidity and allowing more transparency. Securities, collectables, financial instruments, real estate, etc etc can all be tokenized and made available for trading. The main thing holding the rapid advancement up is some form of regulation. And, a regulated secure platform on which to list and provide liquidity. The SDX is looking to provide that regulated “haven”.
The Swiss are not the only countries or jurisdictions developing rules, regulations and platforms. Gibraltar is one country that is leading innovation. Some Asian countries such as Japan, South Korea are well advanced and already accepting cryptocurrencies as legal tender which will make the tokenization of assets even easier. One major “left out”? The U.S. There are lots of projects going on BUT the U.S. is so regulatory dependent (think SEC, CFTC) that the tokenization and digitization acceptance is moving “offshore”. Thank goodness for places like Switzerland and Gibraltar. Good luck SDX, its needed.
Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews