Archax pilots digital FTSE 100 stocks and gilts on blockchain
Investors will soon be able to trade digital versions of FTSE 100 stocks and UK government bonds on the blockchain, as digital asset firm Archax prepares to issue prototypes of both this week.
The London-based company, which is backed by asset management giant Abrdn, will launch the pilot on June 7 on a handful of public blockchain networks, likely to include Ethereum, Polygon and Algorand.
Initially, Archax will buy shares in one FTSE 100 stock, which has not yet been disclosed, and UK government bonds, known as gilts. It will hold the underlying assets on its custody platform, and then tokenize its interest in the assets.
CEO Graham Rodford said clients would be able to trade tokens, which denote ownership of the real assets, among themselves by the fourth quarter of 2023.
It comes as part of a broader push in the digital asset industry to bring existing products such as stocks and bonds onto distributed ledger technology.
Banking giants from Goldman Sachs to State Street have predicted that efficiencies realized through tokenization will ultimately save millions, enabling faster settlement of trades and reducing administrative costs.
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Meanwhile, the UK government recently concluded a consultation on how it will regulate the industry going forward, suggesting it would monitor the institutional side of blockchain and crypto in a similar way to financial services.
Rodford told Financial news: “Having spent five years building our regulated infrastructure in the UK, we are now able to create digital versions of traditional products, which we hope will bridge the way to the digital world of the future.”
“We are gradually seeing clarity in regulations and laws that allow us to explore these initiatives more freely.”
Tokenization has become a popular way for financial institutions to dip their toes into blockchain technology after the FTX collapse caused many to distance themselves from mainstream cryptocurrencies such as bitcoin and ether.
In May, Goldman, Moody’s, Deloitte and others announced they would help launch a new blockchain network, the Canton Network, which promises to allow previous blockchain systems to operate across a single server while retaining the privacy controls required of financial giants.
Meanwhile, firms such as Nomura and Standard Chartered have emphasized digital asset startups to avoid falling behind competitors developing blockchain products.
Abrdn announced it had taken a stake in Archax last year, making it the largest outside shareholder in the firm, which recently rolled out a custody service for crypto and other digital assets.
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