Today FinClear, one of Australia’s largest settlement firms for listed securities, has gone live with a blockchain-based platform for tokenized unlisted securities, FCX. It uses Digital Asset’s Daml smart contract language, the same used in the stalled ASX CHESS replacement.
One of Australia’s big four banks provides a facility to automate money movement between a bank account and cash tokens in an FCX wallet. The tokenized cash is then used to settle equity purchases instantly and atomically. We don’t know which bank is involved with FCX, but ANZ was involved in a stablecoin project earlier this year.
Stepping back, FCX enables private firms to use the platform to issue new tokenized stock to investors. Underpinned by distributed ledger, a company can manage the entire process, including the offer information, documents and settlement, providing permissioned access to potential investors. Once an investor pays for the stock, it appears instantly in their FCX wallet. The issuer can keep tabs on the entire process.
The solution enables companies to easily manage the list of investors, the cap table. And FCX plans to enable secondary trading of private equities next year.
“The FCX platform is combining technological and regulatory expertise and rigor to tokenize securities in a secure way, which is a totally different proposition to a cryptocurrency,” said David Ferrall, Founder & CEO of FinClear. “We are applying our extensive experience in highly regulated, listed markets to give unlisted companies and investors the security they deserve.”
Three companies are using the platform so far, including FinClear itself, givvable and Circle In.
While blockchain is often seen as democratizing finance, as with many other jurisdictions, Australia restricts access to private company offerings to ‘sophisticated’ investors, the equivalent of accredited investors.
Some see unlisted securities as low-hanging fruit for distributed ledger applications. That’s because of the efficiencies in the public markets and the increasing number of unicorns staying private. In the United States, the DTC is progressing with its Project Whitney with plans to launch a private stock and digital assets solution, the Digital Securities Management (DSM) Platform, subject to SEC approval.
Some of the more institutional offerings include Switzerland’s daura, which has collaborated with the SIX Digital Exchange, ADDX in Singapore and France’s LiquidShare, which also uses Daml. There are several public blockchain security platforms, such as iStox, Securitize and Tokeny.