Building the Financial Fabric of the Future
by Mason Borda, CEO, TokenSoft
I’ve been talking with a lot of industry groups lately about the important work many in the industry are doing to rebuild the financial services infrastructure on the blockchain. In essence, we’re creating a single, globally accessible financial fabric for anyone to access. When it comes to digital securities and institutional readiness, we may be three to five years away from an industry that can truly take flight. Still, many of us in the space share a common passion for creating a new financial ecosystem for companies to access capital from markets they couldn’t access before. And it’s exciting, with a lot to do to prepare for that next stage. For a killer app to emerge, there are two paradigm shifts introduced by the blockchain that will play a key role: synergy of global regulations and 24/7 access for transfers and settlement. And we’re on our way — let’s look at recent developments that are bright signs for the future of the digital securities industry.
Synergy of Global Regulations
It’s my belief that a global fabric for compliant digital securities is needed. We see this in our work at TokenSoft as we work across jurisdictions to support our clients. Digital securities will need to adhere to securities, banking, and tax laws, regardless of jurisdiction. Today, jurisdictions differ in their requirements, and we’ve built a scalable workflow that supports investor onboarding for 50+ jurisdictions. Over time, this may get simpler but for now, we have our clients’ back in getting it right regardless of the jurisdiction of domicile and/or sale. We see specific country examples evolving their guidance in similar ways:
Luxembourg: Earlier this year, Luxembourg’s Chamber of Deputies signed a bill that provides legal certainty for the circulation of securities via blockchain technology.
Singapore: In late January, the Monetary Authority of Singapore halted securities token offerings in the country until they can fully comply with regulatory requirements under the Securities and Futures Act.
Malaysia: In mid-January, Malaysia’s Minister of Finance said it will put in place guidelines to regulate the offering and trading of digital assets. The framework is anticipated in the coming months.
Australia: In April of 2018, Australian regulators announced that digital currency exchange providers are required to abide by anti-money laundering (AML) rules.
24/7 Transfers and Settlement
The rise of stablecoins, digital assets pegged to currency, is a bright light in this area. As we wrote in a recent blog post, stablecoins are built in such a way that global participation and near real-time transfer are possible; however, we need to remember these assets are likely to require adherence to compliance requirements in the applicable jurisdictions. So, the promise is there but the compliance infrastructure has yet to catch up.
Recently, JP Morgan entered as the first bank to launch a stablecoin, JPM coin. Initially accessible to wholesale customers of JP Morgan, JPM coin is designed to instantly transfer value. As a permissioned private blockchain, it will achieve faster settlement times for payments between institutional customers of the bank (of which there are lots!). This launch followed other notable stablecoin entrants, including Gemini’s GUSD and USD Coin (USDC) from Coinbase. At their core, these stablecoins allow dollars to move globally, instantly.
In summary, I’m excited about the promise for digital securities and working across the industry with like-minded individuals and institutions to move our collective path forward. We are excited to have brought pioneering software and security to the space. We hope that as our tools, including our investor onboarding platform, ERC-1404, and Knox Wallet, become more commonplace, broad institutional access to the digital security market may increase. Issuers and providers will need to be ready with education and support.