Australian stock exchange may consider listing tokenized real-world assets

June 29, 2023 Coin Telegraph

ASX

The tokenized asset would need to be “appropriately backed” but could “absolutely” be listed in the future, said ASX chief information officer Dan Chesterman.

The Australian Securities Exchange (ASX) is unlikely to directly list a cryptocurrency on its exchange but could consider an “appropriately-backed” tokenized real-world asset such as gold.

Speaking to Cointelegraph, Dan Chesterman, the ASX’s CIO and group executive of technology and data said while there are hurdles for it to directly list a cryptocurrency the company could consider listing tokenized real-world assets.

“There’s been, in the past, challenges associated with getting to the stage we could directly list a cryptocurrency mainly because it doesn’t meet a lot of the listing rules,” Chesterman said.

“Could I imagine us potentially, in the end, having a tokenized product listed on us? Absolutely.”

The ASX is the 16th largest stock exchange in the world by market capitalization, according to a March 28 Yahoo Finance report. As of the first quarter of 2023, the ASX accounted for nearly 82% of the total dollar turnover in local equity market products, per data from the Australian Securities and Investment Commission.

*Dan Chesterman speaking at opening of Australian Blockchain Week. Source: Cointelegraph*

Chesterman’s approach to blockchain aligns with earlier comments made by major banking executives who suggested the narrative around blockchain has become one around being an “efficiency driver.”

“The experimentation with blockchain is not going away in large banks and large institutions,” said Howard Silby, chief innovation officer at National Australia Bank (NAB).

“There’s a lot of high friction high-value customer processes that remain a very ripe area of innovation.”

Meanwhile, Sophie Gilder, Commonwealth Bank’s managing director of blockchain and digital assets believes tokenization of assets and smart payments could drive significant efficiencies while reducing risks and costs.

“In the current market, it’s harder to talk about the upside of digital assets. Instead, I think it’s more about efficiency, and there’s a lot to be gained there,” Gilder said.

“So we've moved from irrational exuberance, which actually was not great for the market apart from, perhaps attracting capital, to a focus now on what is the add-on utility.”

Over the last year, ASX has faced criticism over its decision to suspend the blockchain-based upgrade of its nearly 30-year-old clearing and settlements system, which has already cost up to $166 million ($255 million Australian dollars).

Chesterman reiterated however that the decision was not a “rejection” of blockchain technology.

“Our decision to pause was based on our assessment that we were seeing some delays occurring and reoccurring and we didn't want to go through a process where there was a prolonged and ongoing delay, and that would have an impact on our customers,” he said.

“We made a very deliberate decision [...] to pause in order to not create an ongoing state of uncertainty.”

Chesterman said the exchange continues to work with infrastructure company Digital Assets for its blockchain development platform Synfini.

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31% of young Aussies hold crypto despite being ‘risk averse’ — ASX survey

June 20, 2023 Coin Telegraph

ASX

While young Australians are more interested in crypto, it’s the 25- to 49-year-olds who own the most.

Despite seeing themselves as more “risk averse” than their older counterparts, nearly a third of all young Australian investors hold or have traded cryptocurrencies over the last year, a new study has found.

In an Australian investor study from the Australian Securities Exchange (ASX), 46% of “next generation investors” — the report’s terminology for investors aged 18 to 24 — described themselves as preferring “stable returns” — yet 31% of them invested substantially in crypto.

*Attitude towards investment risk by age group. Source: ASX*

“The apparent financial conservatism of younger investors is at odds with their level of investment in cryptocurrency,” the report wrote.

Researchers said the reason that younger people invested in crypto boiled down to a desire to do things differently from their parents combined with the observation that “many of the 1.2 million new investors who've taken up investing since 2020 are tech-savvy and connected to social media.”

According to ASX’s study, which was undertaken by financial research firm Investment Trends, the median holding of cryptocurrency for “next generation” investors stands at $2,700, representing a 6% weight in their total portfolio, double that of the 3% crypto allocation for all other investor age groups.

However, while young investors owned the most crypto relative to their portfolios, it was the “wealth accumulators” — investors aged 25 to 49 — who owned the most cryptocurrency overall, accounting for 69% of the total investment in digital assets. Investors aged 50+ accounted for just 19% of overall crypto ownership.

*Overall crypto investment snapshot for Australian investors. Source: ASX*

This report marked the first time that cryptocurrency had been included as an asset class in the ASX’s Australian Investor Study. As such, the report approached the subject with a degree of caution, saying it’s still up for debate whether cryptocurrencies can become “fully accepted in mainstream investing.”

Still, the study admitted that despite its volatility, cryptocurrency remains a popular choice among investors, revealing that 29% of all “intending investors” — people who don’t currently invest in any capacity — are considering some type of crypto investment within the next 12 months.

Notably, centralized crypto exchanges were singled out as a potential “handbrake” for the growth of crypto investment in the future.

The United States Securities and Exchange Commission’s recent spate of legal action against exchange giants Coinbase and Binance in the United States stands as a clear example of challenges facing centralized exchanges.

Australia's crypto exchanges have also faced challenges in recent months. In May, Binance Australia announced it is suspending all Australian dollar-denominated services in June after its local payments provider was ordered to halt support for the exchange. On the same day, Australia’s second-largest bank, Westpac, banned customers from transacting with the exchange.

The following month, Commonwealth Bank — Australia's largest bank — said it may decline certain payments to crypto exchanges, citing a "high risk" of scams.

The biggest bank in Australia, @CommBank has just taken a giant step backward. They are blocking crypto transactions "for our safety". pic.twitter.com/4tsddbNPg8
— Charles Edwards (@caprioleio) June 15, 2023

The research for the ASX’s report was conducted in November 2022, with its findings based on an in-depth online survey of 5,519 Australian adults.

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‘Killer use case’: Citi says trillions in assets could be tokenized by 2030

March 31, 2023 Coin Telegraph

Apollo

The bank predicts the private equity market to become the most “tokenized” asset class because it is more liquid and can be fractionalized.

Investment bank Citi is betting on the blockchain-based tokenization of real-world assets to become the next “killer use case” in crypto, with the firm forecasting the market to reach between $4 trillion to $5 trillion by 2030.

That would mark an 80-fold increase from the current value of real-world assets locked on blockchains, Citi explained in its “Money, Tokens and Games” March report.

“We forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030,” the firm's analysts said.

Of the up to $5 trillion tokenized, the bank estimates $1.9 trillion will come in the form of debt, $1.5 trillion from real estate, $0.7 trillion from private equity and venture capital and between $0.5-1 trillion from securities.

*Blockchain-based tokenization total addressable market by asset class. Source:* *Citi*

The research suggests that private equity and venture capital funds will become the most tokenized asset class, capturing 10% of its total addressable market, with real estate coming in next at 7.5%.

Private equity markets will likely see faster adoption rates because of their favorable liquidity, transparency and fractionalization properties, the bank said.

KKR, Apollo and Hamilton Lane are three private equity firms that have already set up tokenized versions of their funds on platforms like Securitize, Provenance Blockchain and ADDX.

*If Citi’s bullish estimates are reached by 2030, tokenized assets would still only represent a small share of the total addressable markets. Source:* *Citi*

Citi said that blockchain tokenization would supersede legacy financial infrastructure because it is technologically superior and it provides more investment opportunities in private markets.

“Traditional financial assets are not broken, but sub-optimal as they are limited by traditional systems and processes,” it said. “Certain financial assets — such as fixed income, private equity, and other alternatives — have been relatively constrained while other markets — such as public equities — are more efficient.”

Citi argues that blockchain tokenization negates the need for expensive reconciliation, prevents settlement failures and makes tedious operations ever more efficient:

“What DLT and tokenization offer is an entirely new tech stack that lets all stakeholders do all activities on the same shared infrastructure as one golden source of data — no more expensive reconciliation, settlement failures, waiting for the faxed documents or ‘originals to follow’ by post, or investment choices being restricted by operational difficulty in access.”

The investment bank did, however, acknowledge that there are drawbacks at present, such as a lack of legal and regulatory framework, challenges with building the infrastructure and obtaining a widely followed set of interoperability standards.

Citi also noted that some industry players remain “skeptical” too, particularly in light of the Australian Securities Exchange (ASX) recently scrapping its failed $165 million DLT project in November.

There are many more “growing pains” to come, Citi added. But the bank remains confident that the ecosystem will mature as the technology develops:

“Once this intermediate, skeuomorphic ‘straddle’ state is crossed, the new disruptive technology breaks free from the old and ideally directionally trends towards the envisioned end-state.”

Citi envisions this “end state” as a “digitally native financial asset infrastructure, globally accessible, operating 24x7x365 and optimized with smart contract and DLT-enabled automation capabilities, which enable use cases impractical with traditional infrastructure.”

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Aussie stock exchange abandons blockchain plans, leaving $170M hole

November 17, 2022 Coin Telegraph

Aussie stock exchange abandons blockchain plans, leaving 0M hole

ASX

The blockchain-backed upgrade in the works for nearly five years has potentially cost Australia’s primary exchange over $170 million.

The long-anticipated plans by the Australian Securities Exchange (ASX) to use blockchain to bring its clearing and settlements system into the 21st century have just been canceled.

In a Nov. 17 statement, ASX announced it had paused all current activities of its “CHESS replacement project” following an independent review from technology consulting firm Accenture, which identified “significant challenges with the solution design and its ability to meet ASX’s requirements,” stating:

“Current activities on the project have been paused while ASX revisits the solution design.”

For the last five years, ASX had been working on a Distributed Ledger Technology (DLT) solution that would replace its 25-year-old Clearing House Electronic Subregister System (CHESS) used to record shareholdings and manage transaction settlements.

Originally the system was slated for a 2020 launch, but the project was marred by multiple delays over the years with the ASX saying it needed more time for testing, had uncertainty around COVID-19, needed more time for development, capacity overhauls, and even more testing before it went live.

Amongst findings in its 47-page report, Accenture said that business workflows are “not tailored for a distributed environment”, the DLT-based system was too complex, and the completion timeline was uncertain regardless of the application software being over 60% complete.

ASX chairman Damian Roche apologized for the disruption, adding “there are significant technology, governance, and delivery challenges that must be addressed.”

Helen Lofthouse, ASX Managing Director and CEO said “it’s clear we need to revisit the solution design” adding “we have some work to do before updating and consulting with stakeholders more deeply.”

Thee announcement has drawn criticism from the Australian Securities Investment Commission (ASIC) and the Reserve Bank of Australia (RBA) — respectively the country’s financial market regulator and central bank — which released a joint statement on the matter.

RBA Governor Philip Lowe called the ASX announcement “very disappointing” and ASIC chair Joe Longo said the ASX “failed to demonstrate appropriate control of the program to date, and this has undermined legitimate expectations that the ASX can deliver a world-class, contemporary financial market infrastructure.”

The two organizations highlighted their expectations saying the CHESS replacement must be live before the current system no longer meets requirements and that “market and service continuity be secured” by the current system.

The ASX must also “uplift its capabilities” and address “the serious deficiencies identified by the independent report” starting by creating a plan to address them.

The ASX said the project had racked up a pre-tax charge of between $164.6 million and $171.3 million ($245 to 255 million Australian dollars).

Australian Securities Exchange takes step towards tokenized asset trading

August 16, 2022 Coin Telegraph

ASX

“There's a strong value proposition here that we can essentially tokenize any asset and bridge that into the ASX ecosystem,” said Zerocap CEO Ryan McCall.

Companies on the Australian Securities Exchange (ASX) could be able to trade tokenized bonds, equities, funds, or carbon credits after a successful proof-of-concept trial led by the digital asset investment platform Zerocap.

On Monday, Melbourne-based digital asset investment platform Zerocap told Cointelegraph it had successfully used Synfini to bridge over its custody infrastructure onto the platform as part of a trial program, allowing for the trading and clearing of Ethereum-based tokenized assets.

The trial is part of ASX’s distributed ledger technology (DLT)-based settlement project Synfini which was launched in November. The platform offers clients access to ASX’s DLT infrastructure, data hosting and ledger services, enabling them to build blockchain applications off of it.

Zerocap co-founder and CEO Ryan McCall stated that it occurred last year and that “it got a lot of interest” in the institutional sphere, particularly from companies that are exploring ways to tokenize and trade bonds, funds or carbon credits.

“Thinking beyond Bitcoin, Ethereum and other crypto assets, the tokenization of bonds, equities, property, carbon credits, private equity, and anything that's essentially illiquid, there's a strong value proposition here that we can essentially tokenize any asset and bridge that into the ASX ecosystem.”

McCall outlined that the companies dealing with especially “opaque and difficult to access markets” such as bonds and carbon credits are seeking out ways to efficiently cut costs, save time on issuance and open up broader investment access via tokenized offerings.

Questioned on whether the ASX would be able to offer crypto trading via Synfini, McCall stated “yes” but that he hasn’t seen any indicators of interest in this field, as the ASX and others are primarily focused on tokenizing traditional/real-world assets.

It is worth noting however that Synfini is a separate initiative from ASX's blockchain-based CHESS system replacement that is yet to be implemented after facing years of technical issues.

McCall went on to suggest that Zerocap could be looking to officially launch asset tokenization and trading services via Synfini to institutions in the near future, as it has just cleared the necessary steps for legal approval.

“Since then we've been going through the certification process to get into the production environment, which as you can probably imagine, for any sort of enterprise software, but certainly for an exchange, it's a fairly stringent process. So we've just cleared the production certification. So getting ready to deploy this now,” he said.

McCall also highlighted that with the ASX being a reputable source to host digital asset trading, doing so would likely dampen institutional concern over counterparty risk relating to the crypto sector.

Such risks have been thoroughly prevalent this year due to several major crypto firms either facing liquidity issues, or going completely bankrupt in the case of Celsius, Voyager Digital, and Three Arrows Capital.

“So counterparty risk, you know, credit risk specifically I guess is the biggest talking point in crypto at the moment with the 3AC disaster. And I think that just demonstrates the use case for what the ASX is trying to do here.”

“You know, thinking about the ecosystem and investor protections and all the things that it offers, there's definitely a need for something like that in digital assets,” he added.

The Zerocap CEO also suggested that Synfini will likely be utilized by a wide range of firms, as the platform is user-friendly and removes a lot of variables for companies.

“If a custodian or a fund manager or any application developer wants to come and build a blockchain application, they can do that on this Synfini platform without having to really worry about managing any of the infrastructure, which is pretty cool,” he said.

Zerocap recently had a hand in a tokenized carbon credit transaction in late June, with the firm providing market-making services and liquidity for an exchange between major Australian family office Victor Smorgon Group and BetaCarbon, a blockchain-based carbon trading platform.

The deal was also facilitated via A$DC, a fully AUD collateralized stablecoin developed by “big four bank” Australian bank ANZ.

Three new crypto ETFs to begin trading in Australia this week

May 10, 2022 Coin Telegraph

21shares

Australians will soon have five options for cryptocurrency exchange-traded funds as the delayed funds from Cosmos and 21Shares launch this week along with 3iQ’s in the future.

Australians will soon have more options for spot cryptocurrency exchange-traded funds (ETFs) after a previous hold-up was given the green light this week and new funds entered the ETF market.

The latest update came late on May 9 as Cboe Australia issued a round of market notices that three funds previously delayed are expected to begin trading on Thursday, May 12. They include a Bitcoin ETF from Cosmos Asset Management, plus Bitcoin (BTC) and Ethereum (ETH) spot ETFs from 21Shares.

Cboe Australia and Cosmos did not immediately respond to a request for comment, but a spokesperson from 21Shares confirmed to Cointelegraph:

“We're listing on May 12, this Thursday. The downstream issues are resolved.”

On April 26, a day before three of the first crypto ETFs were set to launch, the Cboe Australia exchange delayed the listing of all three funds due to what it said were “standard checks”.

21Shares said to Cointelegraph at the time that a "service provider downstream” needed more time to support the launch of the products which was believed to be a prime broker or other major financial institution.

The listing date comes just in time as a new competitor stepped into the ETF race. 3iQ, the Canadian firm with Bitcoin and Ethereum spot ETFs listed on the Toronto Stock Exchange (TSX), submitted two offer notices to the Australian Securities Exchange (ASX) on April 28.

The notices revealed plans for the firm to offer units of its Bitcoin and Ethereum ETFs on the Cboe Australia exchange. It will provide exposure to the crypto assets by purchasing units of the existing funds on the TSX similar to Cosmos’ ETF which purchases the Canadian Purpose Bitcoin ETF.

It’s unclear when the funds from 3iQ will be listed but with the announcement of the Cosmos and 21Shares funds listing this week, it’s unlikely 3iQ will win the competition of being the first Australian crypto ETF, the prize of which it’s believed could be over $1 billion in inflows.

ASX sounds crypto exchange custody warning, calls for better regulations

July 21, 2021 Coin Telegraph

ASX

The Australia Securities Exchange says crypto investors in the country need to be mindful of the dangers of holding their cryptocurrencies on exchange platforms.

The Australia Securities Exchange (ASX) has weighed in on the issue of crypto custody amid the ongoing discussions within the country’s Senate Select Committee on Financial Regulatory Technology.

In a submission to the committee on July 16, ASX highlighted crypto custody on centralized exchanges as a significant risk factor for investors.

The ASX submission outlined the implications of crypto exchange custody arguing that investors do not have access to their private keys while their funds are domiciled in these platforms — another way of saying “not your keys, not your coins.”

According to the ASX, crypto funds left on exchange wallets are vulnerable to cybersecurity risks in the form of theft by hackers. Crypto exchange hacks used to be a regular occurrence in times past with over $53 billion worth of virtual currencies stolen from platforms between 2011 and 2020.

However, improved security measures on exchanges have stemmed the tide of these thefts significantly but the odd exchange hack still happens every so often.

Apart from cybersecurity problems, the ASX submission to the Senate committee also stated that investors who chose crypto exchange custody run the risk of their funds being handled in an undisclosed or unauthorized manner.

While noting that cybersecurity risks are not unique to crypto exchanges alone, the ASX outlined measures such as regulation, appropriate asset capitalization, and insurance as quality assurance protocols imbibed by legacy asset custodians.

As part of its submission to the committee, the ASX called for disclosure requirements for crypto exchanges as well as independent assurance protocols to better safeguard assets on their platforms. The securities exchange also recommended the introduction of core standards for digital asset custody services.

Given the absence of clear-cut crypto regulations in Australia, the ASX advised that such measures be included in a broader cryptocurrency regulatory framework for the country.

ASX

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