🤝 Security Token Prime Insights: 12/2/2024

Exclusive Intelligence for Security Token Prime Members

December 02, 2024

If this email was forwarded to you, sign up here to receive it directly in your inbox every Monday morning!

Summary and Key Takeaways

1. CFTC Committee Recommendation on Tokenized Collateral

The Commodities Futures Trading Commission (CFTC) of the United States has 5 advisory committees, one of which is the Global Markets Advisory Committee (GMAC), sponsored by Commissioner Caroline D. Pham. They convened on November 21st and approved recommendations on expanding the use of non-cash collateral using distributed ledger technology. The vote resulted in no objections and marks the 14th recommendation GMAC has advanced to the Commission in the last 12 months. 

We’ve seen this already with Barclays, BlackRock, and JPMorgan just over a year ago using tokenized money market fund units for posting margin. Then again earlier this year with BUIDL being used for collateral on FalconX and Hidden Road. That said, regulatory clarity is still top of mind for many as they explore and build infrastructure to support tokenized collateral, which hopefully this advancement will help in.

The fact that the GMAC’s recommendations include no additional changes to regulation is a positive sign as it shows the CFTC’s understanding of blockchain technology being simply that, a technology. They acknowledge distributed ledger technology being used for internal books and records, rather than changing the nature of the asset itself and therefore institutions can rely on existing rules and guidelines. Full Meeting Video Linked Here.

2. Spain Issues 1st ERIR License

While there’s broader European regulatory guidance in place, there are also those on a country by country basis. Looking at Spain, their regulator the National Securities Market Commission (CNMV) has granted Ursus-3 Capital the first Entity Responsible for Registration and Registry (ERIR) license, allowing them to register and supervise tokenized RWAs. 

To bring this to an in-production state, Ursus-3 is partnering with Token City for their tokenization platform and ONYZE for custody with this partnership also approved by the CNMV. According to Token City, the first issuance under the ERIR license will be that of Dianelum for €5M, which appears to be a diamond mining company.

3. Custody Updates: Zodia Partners with Securitize for BUIDL, tZERO Launches Custody via SPBD

Custody is a subject often overlooked yet very important in transacting assets. It’s what ensures the safety of those assets, including tokenized securities such as tokenized funds and liquidity products.. Zodia Custody, which is backed by Standard Chartered and Northern Trust, is now partnered with Securitize for custody of tokenized assets like BlackRock’s BUIDL. For institutions to come on-chain they need to feel safe and secure doing so, which is where enterprise-grade solutions such as Zodia come into play. Others using the StanChart/NTRS-backed platform include 21Shares, Invesco, Bitwise, and more.

In other news, non-institutions also need custody solutions which is why many tokenization platforms partner with 3rd parties. What if the same platform could custody on behalf of their clients? tZERO is now offering that thanks to their newly-issued Special Purpose Broker Dealer (SPBD) license. Only one other firm in the space, Prometheum, has this license as well which they recently announced they’ll soon start applying to traditional securities.

In this past Friday’s interview with Alan Konevsky from tZERO, he expressed how this could help improve the user experience and liquidity rather than the former,  fragmented environment. He also shared that another unlock for them is having the full lifecycle of an asset live on-chain, meaning we’ll be seeing more blockchain-native RWAs rather than the digitally-enhanced counterparts (mirror assets) we’ve seen in the past. The first token to take advantage of this is none other than their own $TZROP, which represents preferred equity in tZERO, with others in the pipeline and we expect this to be fully operational in Q1 2025.

Notable Market Headlines

Institutional Activity

NEW STM REPORT NOW AVAILABLE

Security Token Market is proud to release October 2024’s market report, analyzing secondary market activity and benchmarking against the CoinDesk 20 Index (CD20).

In this month’s market report, we have meticulously tracked 680 security tokens spanning across 35 marketplaces and 10 blockchains.

Sections include:

  • Key Takeaways

  • CoinDesk 20 Index Benchmark

  • Quantitative Highlights

  • Asset Class Breakdown

  • On-Chain Liquidity Products

  • Platform Spotlight: Hashnote

  • New Tokens and Announcements

STM Data

It’s the start of a new month which means you can expect a new market report from us soon! This week the STM Data team is going to take a quick look at the tokens with the most volume this past month:

Token

Volume

Hashnote US Yield Coin

$260,270,745.51

Franklin OnChain U.S. Government Money Fund (FOBXX)

$100,421,059.27

BlackRock USD Institutional Digital Liquidity Fund

$82,599,442.91

Enegra

$1,861,353.57

TZROP

$527,735.69

Republic Note

$183,569.45

INX Limited

$124,146.54

RealUnit Schweiz AG

$100,864.12

Aspen Coin

$82,540.56

Realio Security Token

$79,331.98

It’s important to remember volume comes in both primary and secondary market stages, including subscriptions & redemptions and transfers. Because of this, it’s no surprise that liquidity products take the top 3 spots - they’re used more frequently and sometimes come with bigger investment minimums. On BENJI and BUIDL, both expanded to new blockchains this month which opens doors to investors in different ecosystems and encourages more infrastructure support. 

For more data insights and charts, visit STM.Co and keep an eye out for the RWA Securities Market Update: November 2024 report coming soon!

Security Token Prime is Made Possible Thanks to Our Enterprise Partners

Hello readers,

We’re entering the last few weeks of normal working business weeks but in the world of crypto, holidays don’t necessarily always apply. When you have real-time, 24/7/365 markets you inevitably get activity and announcements at possibly any time. I remember back in 2017 when I was frantically looking through telegram groups and urgently buying into an ICO pre-sale at a New Year’s Eve party.  

The convergence of tokenized assets and securities meeting real-time settlement networks is upon us, we’ve already seen the success of tokenized stocks in the past. We’ve got an insane amount of exciting announcements in the pipeline, stay tuned and make sure you sign up for the RWA Foundation on X and Telegram!

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

Events

Recent Recordings

  • (NEW) AI In Digital Assets Marketing and PR with Rob Gonda (Recording Link)

  • Navigating PR Between TradFi and Web3 Media with Amsterdam Group (Recording Link)

  • 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

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.

We hope everyone celebrating Thanksgiving had a great time with friends and family last week. The Security Token Show will be back this Friday with more exciting updates, but in the meantime enjoy this interview with tZERO’s EVP and Chief Legal & Corporate Affairs Officer, Alan Konevsky. 

Helpful Resources

We hope you enjoyed this week's Security Token Prime Insights email - if you have any feedback on either what you liked or what you’d like to see, please reply to this email with it.

This newsletter should be not be considered financial advice.
Security Token Prime Insights is for informational purposes only.