Yesterday the Gibraltar Stock Exchange (GSX) deployed a demonstration bond issuance with the aim of being one of the exchanges to transform capital markets with blockchain and tokenized securities. The issue was made on the GSX Digital Stock Exchange.
Nick Cowan, CEO of GSX, says he plans to “revolutionize the current capital markets model by enabling the listing and trading of digital securities. This is the next significant step in a new paradigm for global finance — opening up new liquidity pools and product”. GSX’s platform is capable of issuing, trading and settling digital securities.
The technology that underpins the demo bond is the Securities Trading Asset Clarification (STACS) Protocol. STACS is the product of a joint venture company Hashstacs Inc. in which GSX Group is a shareholder. Last November the new company was announced with fellow investors Hong Kong-listed Chong Sing Holdings FinTech Group and Cyprus based Prime Fintech.
The protocol involves a hybrid global blockchain which means it’s a mix of permissioned blockchain and public blockchain.
The STACS network aims to encourage stock exchanges, investment banks, brokers and dealers to join as verified partners, benefiting both issuers and investors globally.
The name of the protocol is a hint to the intent to “stack” the digital ledger on top of existing financial institution infrastructure and enable the tokenization of financial services.
The bond prototype involves not only the launch of the bond but also the ability to track selling reports, enforce selling and distribute repayment dividends through smart contracts.
About the Gibraltar Stock Exchange
GSX was established in 2014 and is an EU regulated stock exchange recognized by the European Securities and Markets Authority (ESMA). GSX offers listings of open-ended funds, closed-ended funds and debt, including bonds, assets backed securities and derivative securities. The organization is responsible for maintaining an orderly market and overseeing the listings and member firms. The Listing Authority in charge of the regulatory approval of listings is independent of GSX and made up of officers of the Financial Services Commission (FSC) in Gibraltar.
Other institutional tokenization initiatives
There are several stock tokenization initiatives around the world. The one which appears to be both broad and quite advanced is Switzerland’s SIX Digital Exchange (SDX). Another is Bakkt founded by NYSE owner, ICE. Switzerland, Luxembourg and Liechtenstein and other jurisdictions have been adapting laws to enable institutional tokenization.
There have been dozens of pilot blockchain bond and debt issuance transactions. One of the most active is Spanish bank BBVA which has tried at least six different types of debt. JP Morgan has also used its Quorum blockchain for issuing a Certificate of Deposit for the National Bank of Canada.