One of the world’s biggest stock exchange has laid the foundations to provide a wholistic infrastructure for the tokenization of financial instruments.
“The tokenization of assets as the next level of asset digitization is already transforming current economic landscapes. What we know as financial instruments today will be the digital assets of tomorrow,” says Jens Hachmeister, Managing Director at Deutsche Börse, adding:
“In the future we will be able to tokenize all kinds of assets such as industrial goods, real estate or maybe even labour. The variety of assets will grow.
The technical progress around Distributed Ledger Technology is evolving at a tremendous pace, but the respective infrastructure is lagging behind.
We see a huge demand for a trusted, comprehensive, highly secure and regulatory compliant ecosystem for the emerging digital asset universe. This is exactly what we will tackle now.”
They announced a grand digital assets strategy in cooperation with a number of start-ups as well as Swisscom, a European tech giant.
“To put it in a nutshell: The aim of this cooperation is to jointly build out and grow a trusted and regulatory compliant ecosystem for digital assets,” Hachmeister said.
“This ecosystem will consist of several building blocks, which are not so much different in substance from what we can provide in terms of traditional infrastructure,” said Eric Leupold, Head of Pre-IPO & Capital Markets at Deutsche Börse, adding:
“The core elements provided will include issuance, access to liquidity, banking services and a custody solution – all based on Distributed-Ledger-Technology in a regulatory compliant environment.
Moreover, Deutsche Börse and Sygnum are currently conceptualizing the establishment of a listing and trading venue for digital assets.”
In effect they’re working on launching a crypto stock exchange where IPOs are replaced with ICOs, paper shares are replaced with tokens, then there’s effectively the same service in regards to trading, market making (or liquidity), banking services (or presumably margins, maybe perhaps even options) and then custody or safe storage.
All of it running on the blockchain. Which one – if any – isn’t clear, but presumably it would be blockchain agnostic with the focus more on the digital asset itself. Hachmeister says:
“The foundation is laid; this newly established ecosystem is a first nucleus for the redefinition of financial markets and we are excited to be part of it.
In this regard, it is important to keep in mind that building, loading and operating market infrastructure in our industry on current as well as on new technology is rather a marathon than a sprint.
Deutsche Börse, Swisscom and Sygnum start to build the infrastructure today that is needed for the financial industry of tomorrow.”
This is the latest stock exchange to enter the crypto space after the parent company of NYSE announced in May last year they were to launch a bitcoin trading platform which then became known as Bakkt.
That was followed by Börse Stuttgart, Germany’s second biggest stock exchange after Deutsche Börse, which announced they were to launch a crypto trading platform for bitcoin, ethereum, ripple and litecoin. That is known as Bison and is now live for German residents.
Coinbase made a move too, buying a tokens trading platform among a number of other acquisitions aimed at creating a one stop shop for crypto trading.
Then there’s Switzerland biggest exchange which has announced SIX Digital Exchange which plans to launch later this year. They say:
“SIX Digital Exchange will be the first market infrastructure in the world to offer a fully integrated end to end trading, settlement and custody service for digital assets.”
Binance says it is not competing in what looks like a race, but their Launchpad allows start-ups to issue tokens, which are then usually listed on Binance, with the exchange offering “custody” in as far as they store coins, but no “banking” services or liquidity as far as we are aware as they don’t have margins or futures, let alone options.
There’s also Gibraltar where in July last year their stock exchange launched a crypto trading platform. They too have plans to allow for token issuance and other services.
Finally there’s Circle, which acquired Poloniex last year and recently laid out a vision to tokenize start-ups.
Thus what we have is intense competition for effectively the same markets as crypto “startups” – which have now become billion dollar businesses – “clash” with more traditional stock exchanges in a race to gain the highest market share, and thus liquidity.
Who will come on top of the usual 80/20 rule remains to be seen, but a tokenized economy appears to be closer than one might think following the entrance of a world class stock exchange.