Capital markets News

Finexity plans DLT Pilot Regime application. Partners with Cashlink

finexity cashlink

Today FINEXITY announced a collaboration with fellow German DLT fintech Cashlink. FINEXITY is best known for tokenizing real estate although it expanded its range of assets to include precious metals, collectibles such as vintage cars, and other assets. It also has an over the counter (OTC) secondary market. In addition to the partnership with Cashlink it revealed plans to apply for a license to participate as an exchange and settlement system (DLT TSS) under the DLT Pilot Regime.  This waives certain rules such as allowing consumers to engage directly with exchanges.

Meanwhile, Cashlink is one of Germany’s most prolific crypto securities registrars, with a provisional license from BaFin. Germany has its eWpG laws for crypto securities (digital securities) which waive rules in a similar manner to the DLT pilot regime. Thus instead of the need for a central securities depository (CSD), the combination of a blockchain and registrar take on that role.

“Together, the respective ecosystems are expanding to include issuers, investors and connected distribution platforms and financial institutions,” said Michael Duttlinger, Co-Founder and CEO of Cashlink. “The Cashlink and FINEXITY offering brings the issuance, trading and settlement of crypto securities into the fully regulated securities business.” 

Pooling distribution of digital securities

Both FINEXITY and Cashlink have been using Effecta GmbH’s investment brokerage license for years. By working together and with Effecta they aim to achieve three benefits. First is the regulated issuance of crypto securities using the Cashlink registry. Secondly, they will pool their ecosystems including links to banks to expand distribution for both sets of clients. And thirdly there is FINEXITY’s secondary market, which it hopes to evolve into a full trading venue if approved under the DLT Pilot Regime.

DLT Pilot Regime exchanges are similar to existing ones, but more efficient by reducing the intermediaries and enabling atomic settlement.

Germany’s eWpG crypto securities legislation is the main reason why German firms are likely to have a disproportionate representation in the DLT Pilot Regime. So far there have been at least 88 crypto securities issuances, starting with one by DekaBank in late 2021. However, there’s a desperate need for secondary markets.

“The partnership between FINEXITY and Cashlink is an important first step in preparing for a Capital Market 2.0.,” said says Paul Huelsmann, founder and CEO of Finexity AG. “We complement each other excellently with Cashlink and its capabilities in crypto securities registry management. This, combined with FINEXITY’s efficient trading and settlement system, enables both companies to provide issuers with greater distribution power.” 

A year into the DLT Pilot Regime, there are no active projects and just four DLT Pilot applications in progress. Two are from Germany. One is confirmed to be 21x (we will publish a feature on Monday) and sources say the other is 360x, the joint venture between the Deutsche Börse and Commerzbank. However, the Deutsche Börse declined to comment. Previously, 360x made no secret about plans for a secondary market.

Update: Corrected FINEXITY plans from a DLT MTF, to a DLT TSS. In other words, an exchange plus a settlement system.