Today three digital assets startups announced the creation of the International Security Token Offering Alliance (ISTOA) and a working group for blockchain-based digital securities.
The largest consortium member is Hong Kong-listed BC Technology Group (market cap $3.6 billion) which developed the digital asset platform OSL and has a joint venture with Standard Chartered’s SC Ventures for a digital asset brokerage and exchange in the UK and Europe. The other two firms are Singapore’s InvestaX and UK-based Archax, the FCA-regulated digital securities exchange and custodian.
“We created the ISTOA and the STO Working Group to encourage global conversation, cooperation and standard-setting among regulated digital asset providers in key financial markets,” said BC Technology Group CEO Hugh Madden.
The group said a driver was increasing regulatory clarity around digital securites and licensing regimes in Hong Kong, Singapore and the UK.
“The use of Distributed Ledger Technology (DLT), like blockchain, along with tokenization to create digitally-native instruments is the future for financial markets globally,” said Graham Rodford, CEO of Archax. “For these digital securities to become firmly established and reach their full potential, global standards and interoperability are required.”
Interoperability is a crucial issue. With dozens of platforms for the issuance of security tokens, they are spread across many different blockchains, some public, some private. Blockchain is meant to avoid silos, but there’s a real risk that an asset manager might have to integrate with all of these platforms. The Global Digital Finance association recognizes the issue, and Ownera has developed FinP2P. This aims to solve the distribution issue by routing orders between different security token platforms and has been trialed by ING, the DTCC and others.
In Japan, where there is regulatory clarity over security tokens, multiple consortia were formed, including the Security Token Research Association created by MUFG, which is supporting the Progmat platform and includes several incumbents. The Japan Security Token Offering Association includes most incumbents and the Japan Security Token Association, which has some incumbent members and many startups.
Meanwhile, in Switzerland, the SIX Digital Exchange is now in production. And within a year, Europe should launch its pilot DLT regime, which provides a high value sandbox for security tokens.
