Asian bank’s trials with tokenized securities stuck in silos – industry body

Asian financial regulators should do more to support large-scale trials of tokenized securities, said an industry body. This is because banks and technology firm’s current experiments are stuck in different silos and that hinders the pace of change.

Tokenized securities are products like shares and bonds. Their ownership proof is recorded on a distributed ledger. Many banks are exploring the concept with the hope that it will help them price and settle transactions more efficiently. Laurence Van der Loo, executive director for technology and operations at financial industry body the Asia Securities Industry and Financial Markets Association (ASIFMA) said that the trials so far involve three or four firms working together on proofs of concept which are not interoperable. He added that what they think should be the next step is a regulator-endorsed full-ecosystem experiment that would explore all the interactions and competitive dynamics. And also, all the experiments are still siloed.

An ASIFMA report said that the regulators should expand the scope of their existing sandboxes. And this is for experimenting with fintech initiatives, so that they can enable industry-wide trials. Guidelines about tokenized securities, were already issued by some regulators in Hong Kong, Singapore and Japan. DBS issued a S$15 million ($11.14 million) bond as a security token. This is on its recently established cryptocurrency exchange.

However, the ASIFMA reported that the main obstacles that still persists for companies involved in tokenized securities is that the regulatory and legal challenges. Van der Loo also said that the banks were further along than asset managers when it came to tokenizing securities. At the moment it is very much the sell side looking into this to see the efficiencies it can bring. The buyside interest needs to be there as well, but it is coming.