85% Bond Savings - Tokenization Slashing Costs in Global Markets

We made it to Friday - time to get up to speed on tokenization before kicking off the weekend.

Singapore has certainly been busy this week - let’s see what the world is up to!

🎯🔥 Rapid Fire Takeaways:

💰 Tokenized bond savings: Cashlink estimates 1.2% of bond value

🌱 Tokenization of RWAs Gets Push in Europe as AXA, Generali Buys SocGen's Green Bonds on Ethereum

🎓 Singapore's DigiFT Wins Regulatory Approvals From MAS After Graduating From Sandbox

💳 Chinese visitors to Singapore can use digital yuan CBDC

🚢 Hapag Lloyd, Vodafone to adopt Deloitte public blockchain solution for container identity

💻 ERC-3643: The Ultimate Token Standard for Real-World Assets (RWAs)

Massive bond savings, tokenized payments abroad, and new tech! 

It's a big week for the last month of the year.

💱 Big Bond Bargains - 22-85% Savings! 

We have even more data exploring how tokenization leads to huge savings in traditional financial markets. German tokenization company Cashlink recently published its tokenization study revealing massive cost savings of 120 basis points, or 1.2%, of the value of the bond. 

That may not sound like much, but it translates to savings between 22% and 85%, depending on the underlying assumptions! Recall last week’s newsletter, where we discussed the Hong Kong Monetary Authority’s recent tokenized bonds, saving them 0.78% and increasing liquidity by 5.3%. We’re seeing trends in the making. 

We’re also seeing a rising trend in the intersection of tokenization and sustainability. AXA and Generali have officially bought €10 million worth of green bonds from SocGen using the Ethereum blockchain. Meanwhile, Hong Kong is kicking off a roadshow for its second tokenized green bond offering, coming on the heels of its first offering of $102m worth of green bonds in February. 

Whether sovereign, municipal, or green, bonds benefit significantly from tokenization. 

🏝️Singapore Sprinting Ahead

The economically crucial island nation regularly punches above its weight class, and the tokenization arena is no exception. Digital asset exchange DigitFT has successfully navigated the Monetary Authority’s (MAS) testing ground, the FinTech Regulatory Sandbox, after an 18-month process. The firm can now perform as an organized market, offering secondary-market trading activities for digital securities.

Investment platforms are one thing for digital assets, but where they’ve really fallen flat thus far is market utility. This fact is clearly not lost on Singapore, whose agreement with the People’s Bank of China enables the use of China’s CBDC, the eCNY, in the country. While Singapore isn’t planning on releasing a retail CBDC any time soon, they are planning a wholesale CBDC for release sometime in 2024. 

What better way to plan the next stages of this initiative than by up-close observation of foreign retail CBDCs in the market? 

🏃 Rest of the World is Catching Up

While Singapore meticulously constructs a spider web of tokenization initiatives and angles, the rest of the world hasn’t rested on its laurels. JP Morgan has officially joined the multi-bank (Singapore-based) tokenization platform Partior. They’re the only U.S. bank to receive OCC approval so far - fitting, given JP Morgan co-founded the venture. 

While JP Morgan flaunts its JPM Coin for internal digital cash movements, Partior gives similar benefits between different banks by enabling faster, automated transactions. However, participants still need to rely on conventional settlement, making it more of a proof-of-concept on how cross-border and cross-ecosystem tokenized asset transfers may work for institutional financial entities. 

🏭 Standardization Rising 

The uniform adoption of new technologies requires some standards, and the push for standardization in tokenization is only beginning. This push is on full display in the IMF, World Bank, BIS, and Central Bank of Switzerland’s collaboration on a concept for asset tokenization. The scope involves swapping paper for digital representations, thereby streamlining the lending process and financial access for developing nations. While still early, the humanitarian implications of tokenization may prove its most significant benefit in the long run.

Hapag Lloyd has partnered with Vodafone to move beyond conceptual standardization in its tokenized infrastructure. They’re officially adopting the Deloitte public blockchain solution for its container identity management system. Both companies will work with Deloitte’s KYX Know Your Cargo and Know Your Client identify verification systems built on the KILT protocol.  

🔍 Technical Dive: ERC-3643 in Scope

The customizability of smart contracts is a big part of their allure and benefit. A new Ethereum token standard, ERC-3643, is purpose-built for real-world assets. Also called T-Rex (Token for Regulated EXchanges), this standard is poised to change the game for how we bring traditional assets on-chain. 

This newly proposed standard includes regulations and procedures for handling tokens representing real-world items, such as art or real estate. It works by embedding essential information about assets, including ownership, legal conditions, and compliance guidelines, into the tokens themselves. 

One of ERC-3643’s key features is its regulatory compliance. Tokens remain interoperable with existing DeFi platforms while adhering to local laws and maintaining security and transparency. Tokens using the standard are also upgradeable, offering the flexibility required for digital representations of real-world assets. 

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Is ERC-3643 the right move?

Or should the industry drop the jargon and make tokenization as simple as possible?

Tell us your thoughts on Twitter or LinkedIn, and check out the RWA World Database – the full ESG Report is now live, and we analyze 20+ projects working in ESG, carbon credits, agriculture, energy, and beyond.