FQX, which is rebranding to Obligate, announced a $4m seed extension round from new investors Blockchain Ventures and Circle Ventures, who join existing backers SIX Fintech Ventures and Earlybird. It brings the total for the round to $8.5m.
The startup initially launched an eNote solution – a platform for issuing digital promissory notes – on Swisscom’s Hyperledger Fabric blockchain infrastructure. Using that solution, it executed a pilot with Credit Suisse a year ago and partnered with SIX Digital Exchange (SDX) for trading, settlement and custody.
Now with its Obligate rebranding, it is pivoting to the Polygon public blockchain, launching in February 2023 and will support corporates issuing tokenized commercial paper and on-chain bonds. It is not a lender. The platform facilitates the issuance to make the process faster, simpler and cheaper. And it replaces the role of the issuing and paying agent with smart contracts.
“Obligate is bringing new innovation to help bridge the worlds of traditional finance and DeFi,” said Wyatt Lonergan of Circle Ventures. “Through their platform, Obligate is adding utility and a compliant regulatory framework to the emerging real world asset (RWA) DeFi market.”
The startup mentions that the debt securities are ‘regulated’ and issued within a regulated environment. We believe this means they are standard promissory notes. The promissory notes are based on Delaware law (UETA) or Singapore law (ETA) and Swiss law for ledger-based securities.
In terms of the regulated environment, Swiss legislation supports DLT-based infrastructures and Polygon qualifies as a securities ledger as would most public blockchains, according to Obligate.
Despite being issued on a public blockchain, participants have to go through a KYC and AML process. Obligate says it is a member of VQF, one of Switzerland’s Self Regulatory Organizations (SRO) for AML. That said, the promissory notes are bearer instruments. When the promissory note matures, the repayment can only be made to someone that has gone through the Obligate KYC process. It’s also a tied agent of a German regulated firm.
The investment in the promissory notes is not available to the general public and is restricted to ‘qualified investors’, and excludes some jurisdictions.
From an issuer point of view, the startup has partnered with Credora, the web3 credit rating firm.