Several ethereum tokens will reportedly be trading soon on the Swiss Digital Exchange (SDX).
“BlockState has seen that exchanges and market infrastructure providers are building new digital infrastructure on Corda so they are jumping in,” David Nicol, R3’s head of digital assets, said.
“The way they are going to do that is with SDX, by issuing tokens that were on ethereum onto Corda.”
Opening a wider market
The network R3 is building for SDX will be used for the passporting. The tokens involved will be locked up in a smart contract on ethereum before the end of the year. Mirrored versions of those tokens will then run on Corda.
The approach is similar to global depository receipts wherein company shares are held in custody in one country while traders in another country can use an ownership certificate to trade for them.
BlockState aims to use the passporting to open a broader market for security token issuers, especially those who would much rather leave custody to SDX rather than manage their ethereum wallet.
“A retail investor probably wouldn’t go through a financial institution connected to a regulated secondary market if he is also able to just hold an ERC-20 token in custody,” said BlockState CEO Paul Claudius.
“So I think this is bringing together these two investor ecosystems.”
The security token offering BlockState’s is developing will be the first pilot integration into Corda, followed by one from urban music and lifestyle company Streetlife, and then four others scheduled so far.
Aside from issuing tokens on Corda, BlockState is also registering them as securities in Switzerland. Nicol noted that this approach is a regulatory-friendly way to register securities.
“You can go straight on to a blockchain and you can regulate that system of record,” he said. “And in a space where the ability to execute is almost everything, they [BlockState] are really flying.”
“Swiss regulations are technology-agnostic,” added Claudius. “The issuing of uncertified shares doesn’t require a global paper-based ledger which is dematerialized by a central securities depository.”
“Since this is not necessary, they don’t really care how you manage your shareholder register – you can do it on a piece of paper or on a DLT.”