Two of Germany’s highest profile tokenization startups, Cashlink and 21X are now collaborating to offer a holistic solution for the German market. Cashlink provides securities issuance services and is Germany’s largest crypto securities registrar, where crypto securities refer to blockchain-based digital securities. And 21X landed the first license in Europe under the DLT Pilot Regime for a combined DLT trading venue and settlement system (DLTSS) for digital securities.
Germany’s novel laws support the issuance of digital securities, with Germany leading the way in Europe. However, secondary market laws are created by the EU rather than locally. So holders of securities lack second marketplaces. That’s until 21X launches.
The DLT Pilot Regime relaxes laws that otherwise make it tricky to offer secondary trading for digital securities. For example, it waves rules that require exchanges to use brokers as intermediaries, allowing consumers to engage directly. It also allows a single venue to handle both trading and settlement, provided the infrastructure has the appropriate licensing. Plus, the DLT Pilot Regime supports the use of permissionless blockchains. Both Cashlink and 21X us the Polygon PoS blockchain.
Hence, Cashlink can support issuance, registry and custody, and 21X the trading and settlement side.
“Our partnership with Cashlink brings together two market leaders to unlock the full potential of tokenized securities. As the EU’s only fully regulated DLT exchange, 21X is the perfect platform for Cashlink customers looking to list their tokenized securities,” said Max Heinzle, CEO of 21X.
“Together, 21X and Cashlink are creating a powerful force that will drive unprecedented growth in digital asset trading and transform the capital markets landscape.”
21X – the DLT trading venue
21X plans to launch its trading and settlement venue soon, having received the green light at the end of last year. It will offer an on-chain trading venue using a central limit order book (CLOB). Once a securities sale transaction is executed, it will be settled instantly using the stablecoin referenced by the trading pair. In other words, rather than settling in ‘euros’, the trading and settlement is against a specific stablecoin.
While regulators often have concerns about permissionless blockchains, the 21X trading venue offers permissioned elements on top of the permissionless blockchain. So while consumers will be able to participate, they will have to sign up with 21X and go through know your customer, meaning all uses are known to the operator. If there were a theft, it would be possible to retrieve the tokens.
Cashlink for digital securities issuance
For its part, Cashlink has been responsible for more than 50 digital securities issuances worth around €250 million. It was involved in two digital bond issuances for KfW bank worth a total of €150 million. The startup was the first to be awarded a crypto securities registry license under Germany’s Electronic Securities Act (eWpG). This German law allows digital securities issuers to sidestep the use of a central securities depository, instead requiring the use of a registrar, reducing costs. Cashlink also received a custody license late last year.
While this is an important partnership for both companies, it won’t be exclusive on either side. Cashlink previously announced a relationship with Finexity which has applied for a DLT Pilot Regime license.
And 21X will look to partner with as many issuers as possible. It already has collaborations with fund administrator Apex and Singapore’s SBI Digital Markets. Recently it announced a partnership and conducted a trial with ABN AMRO, which has been involved in a few issuances on permissionless blockchains.
The key point is the availability of a secondary market should eliminate an important adoption hurdle.
