Developments in Singapore continue to create a highly favourable environment for fintechs like Lendo. Today, we heard that the Singapore Stock Exchange (SGX) is backing a new trading platform for security tokens with technical support from ethereum startup ConsenSys.
Coindesk’s Wolfie Zhao reports that the 1X platform went live on 10th July with its first listing of an ethereum token, purchasable with Singapore dollars. The token represents about 7 percent of the shares of a Singapore fund manager called Aggregate Asset Management (AAM).
The goal of 1X is to provide an IPO-like platform but for private companies to raise capital and to increase liquidity in the primary capital market by using a public blockchain to validate transactions.
1X’s CEO, Haiping Choo, told CoinDesk, “We take a portion of private companies — usually 10 to 30 percent — and put that into a special purpose vehicle (SPV) … to back every token we mint for listing and trading.” He added, “The overall idea is to bring liquidity to an otherwise historically illiquid assets. We are starting off with private companies. In the future, we intend to apply the same workflow to other illiquid assets like bonds or real estate, etc.”
Capbridge, a Singapore-based exchange for primary market stock offering set up 1X. It is regulated by the Monetary Authority of Singapore, the country’s de facto central bank and holds a Capital Markets Services license. It also has a Recognized Market Operator (RMO) license for 1X.
SGX, meanwhile, is a strategic investor in 1X, meaning the stock exchange not only has an equity stake but is also involved in business operations. Choo said. “Currently it’s only ordinary/common shares, but we may extend to other share types e.g. preferred shares and other types of securities such as convertible bonds etc.”
Also, by using the ethereum blockchain to replace the role of a traditional settler, the exchange aims to reduce operational costs and make it available for global participants, in addition to the 1,000 accredited investors on the platform.
ConsenSys, the New York-based blockchain software studio started by ethereum co-founder Joseph Lubin, helped design a solution for 1X to issue what are called “modified ERC-20 tokens“ to satisfy interoperability needs and regulatory requirements.
In essence, while 1X functions as a centralized exchange, it does not hold investors’ private keys, and for every trade inside the exchange, on-chain transactions are required to go through the third-party custodian, which for the moment is Equiom Trust Singapore. Other custodians may be added later.