🤝 Security Token Prime Insights: 10/7/2024

Exclusive Intelligence for Security Token Prime Members

October 07, 2024

Summary and Key Takeaways

1. HSBC Issues HK$1 Billion (USD $128M) Bond on Orion DLT, On and Offchain

Tokenizing bonds has been largely dominated by institutions, oftentimes issuing to each other or within business lines of the same bank. HSBC Orion has participated in past bond issuances but this one is unique in a couple ways. First, the 1-year note is the first digital bond under English Law to be issued in Hong Kong and second, it’s integrated with their local CSD, the Central Moneymarkets Unit (CMU).

This is significant because it allows the bond to be accessed both onchain and offchain, avoiding the alienation of investors not ready for blockchain technology meaning less fragmented liquidity for the tokenized bond - a problem many others have. This is similar to bonds we’ve seen issued on SIX Digital Exchange which integrates their non-blockchain CSD as well, resulting in the same accessibility. With that said, the 3.6% notes settled in T+2. This begs the question of when will more institutions be comfortable enough with blockchain to participate in tokenized assets to the point of not needing to accommodate conventional options AKA reaping the T+0 benefits.

2. Tokenized Assets Moving Across Institutions: Swift’s Test Transactions and Euroclear’s Tokenized Gold Pilot

Multiple institutions are creating their own blockchains, building their own digital asset platforms, and participating in proofs of concept which has stimulated activity and excitement around this technology. However, how will they interconnect? How can they add life to their tokenized assets? 

Swift and Euroclear seem to want to answer these questions. Starting with Swift, they’ve announced that banks will be able to test transactions in 2025. Known for their global messaging network, it makes sense that they’re the ones to connect these institutional “digital islands” and their digital assets & currencies, citing that there are 134 countries exploring CBDCs. The Hong Kong Monetary Authority and Banque de France are already using Swift as a part of the ECB trials. 

On the second point, giving tokenized assets more utility, Euroclear, Digital Asset, and the World Gold Council are working together to demonstrate how tokenized gold can be used as collateral. They tokenized guilts, eurobonds, and gold via the Canton Network (led by Digital Asset) proved to be useful “to meet intraday margin calls outside of normal settlement cycles, processing times, and time zones” according to Digital Asset’s Chief Business Officer Kelly Mathieson. This makes sense as gold has historically been burdened with storage needs. With all that in mind, this pilot involved 27 market participants and used 14 Canton nodes, with Euroclear acting as the settlement provider. With 100s of financial institutions in Canton Network's ecosystem, are they going to be an interoperability solution that institutions will conform to? Will Swift overtake them? We’ll have to keep up with their developments to find out.

3. Aktionariat is Expanding Their Listing Partnerships with INX

INX has been on a roll with listings this year especially with tokenized equities. INX listing Backed NVIDIA (bNVDA) made headlines and this was followed by Backed listing more tokenized stocks on INX including tokenized Microsoft (bMSFT), Alphabet (bGOOGL), Tesla (bTSLA), and GameStop (bGME) with more in the pipeline. How are these performing? Find out in STM’s RWA Securities Market Update reports, with September 2024’s edition coming out this week!

It doesn’t stop there though as INX is now partnering with Aktionariat out of Switzerland to list their assets as well. Starting with Aktionariat’s own equity (DAKS), it’ll be interesting to see how quickly they onboard all 72 tokenized companies. This comes shortly after Aktionariat announced their partnership with Taurus’s TDX marketplace, starting with RealUnit Schweiz AG (REALU) which our market reports have historically shown to be one of the most actively traded Aktionariat tokens. While Aktionariat offers limited bulletin board style of trading for their tokens, they’re now looking to expand their ecosystem to regulated marketplaces which will bring more liquidity to their assets and vice versa presumably bring their 30,000 investors to those platforms to participate in other offerings.

Notable Market Headlines

Institutional Activity

NEW STM REPORT AVAILABLE - Updated tZERO Interview!

Look out for STM’s latest report: State of the Tokenization Industry 2024 - The Year of the RWA which features over 350 service providers and tokenization issuers and their updates for the year to date across 18 categories from blockchains to issuances to DeFi and all the updates from tokenization platforms and marketplaces. Dive into the report, made possible thanks to SteelWave Digital and now with a special interview with tZERO! Check out the updates. 

STM Data

The STM Data Team will be releasing our RWA Securities Market Update: September 2024 report this week. Want a sneak peek? Let’s dive in. 

The hypothetical basket of security tokens did not perform as well as it did last month (3.03%), with just a 1.06% growth compared to the CoinDesk 20 which bounced back significantly from last month’s -14.45%. Security tokens at the end of the day are that… securities. This means that they’ll likely be more stable due to the underlying asset’s value, unlike crypto which proves to be very volatile. That said, the reason we benchmark against the CD20 is for people to consider how they may diversify their portfolios across different digital assets (not financial advice).

In September, trading activity picked up 14.41% at 254 tokens, compared to 222 tokens in August 2024. Additionally, the overall volume in September showed an increase of 20.82% from $3,460,441 to $4,181,065. Throughout the month, the market cap increased 2.11%, starting at $41,094,460,272 on September 1st and ending at $41,961,430,766 by the close of the month.

How does this break down for each asset class? Find out in our report set to release this week and of course follow trading activity on STM.Co!

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Events

Recent Recordings

  • (NEW) Beyond the Hype: Cracking the Code of Successful Asset Tokenization with BlockInvest and Polygon (Recording Link)

  • Risk Management in Tokenized Assets with Moody's and Particula (Recording Link)

  • Blockchain Meets Construction with Inveniam & LV8R Labs (Recording Link)

  • Non-Performing Loans with BlockInvest and Davis & Morgan (Recording Link)

  • Issuer Spotlight: Tuscany National Token (Recording Link)

  • Platform Spotlight: Block Time Financial (Recording Link)

  • The TradFi/DeFi Hybrid with Maple, Centrifuge and Swarm (Recording Link)

  • Platform Spotlight: REtokens' New Platform with Tyler Vinson and David Kirschbaum (Recording Link)

  • Powers Hour: New SEC “Dealer” Rule Expansion and DeFi Impacts (Recording Link)

TokenizeThis Workshop Tour Around the US Launches September

Get your tickets today for a full day masterclass around tokenization from A to Z. There continues to be a massive education gap in the industry and off the success of the original workshop in Miami last May, we’ve decided to go nationwide. We’ll be visiting NYC, Houston, Boston, LA, SF, Atlanta, and Chicago, check out workshop.stm.co for more information. Use code PRIME for 15% off.

Hello readers,

As we head into the last good month of work before the new year many of us are evaluating budgets and preparing for next year. You’ll soon be hearing all about TokenizeThis2025 so be sure to save the date for April 16-18.

Business-as-usual will be the mantra closing out the year. This means we can expect more token offerings, a few more partnerships, maybe some secondary listings, and a case study or pilot study report by a big firm here and there. Don’t expect anything groundbreaking to happen, all eyes will continue to be on tokenized treasuries for the time being. Use this opportunity to position yourself and head into 2025 with your silver bullet. If crypto prices were to rally to new highs, we could well be looking at an avalanche of capital entering the market!

Happy tokenizing,
Herwig “Happy” Konings
CEO, Security Token Group 
Follow me on X / LinkedIn

Herwig’s Pick: Swift

Kyle’s Pick: Black Salmon

Find out why and more every Friday live at 2pm EST on LinkedIn or X/ Twitter. Past episodes available on Youtube or your favorite podcast platform! 

Helpful Resources

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