Crypto startups Zilliqa and MaiCoin have teamed up to create a centralized security token exchange in Singapore that will apply blockchain technology to the trading of traditional asset classes.
Announced today, Hg Exchange aims to act as a “one-stop solution” for token issuers, buyers, sellers and market makers, providing participants access to privately held shares and security tokens.
Hg claims to be the first “member-driven exchange” in southeast Asia seeking to merge the traditional finance industry with the nascent crypto space, meaning any participants in the platform must go through the licensed financial intermediaries attached to the exchange.
Further, the exchange said it hopes to provide investors access to both new ventures and established, closely held tech giants:
“It is envisaged that Hg Exchange will provide access to high-growth startups and also decacorns [companies valued above $10 billion] such as Uber, Airbnb, Space X, Grab and Didi Chuxing, which are currently not within reach of the average investor.”
Hg added that Zilliqa, which is aiming to launch its own blockchain mainnet on Jan. 31, will facilitate the tokenization process of private company shares on its network. However, there is already a precedent for tokenizing existing shares. DX.Exchange, for example, lists ethereum tokens that it says are backed 1-for-1 by publicly traded stock held by a third party, and Swarm has done this with private company equity (much to those companies’ chagrin).
Hg added that it will allow founders, employees and other shareholders to monetize their shares.
Combining private equity and other traditional asset classes with blockchain technology can “liquefy previously illiquid assets,” Alex Liu, MaiCoin’s CEO, said in a statement.
The exchange has already signed a memorandum of intent with its first four members: Phillip Securities, PrimePartners, RHT Capital and Fundnel.
Fundnel co-founder and CEO Kelvin Lee said in a statement that future investors will be looking for different assets and products than those at present, spurred by ongoing digitization.
“The digital-first strategy adopted by Hg Exchange is envisioned to seamlessly connect private enterprises with the right investors, and also democratize the capital market by providing investors with a chance to participate alongside their institutional counterparts,” he said.
Any financial intermediaries signing up to the exchange need to be licensed to conduct activities by the Monetary Authority of Sinagpore (MAS), Hg noted. The exchange has also applied to participate in MAS’ FinTech Regulatory Sandbox. The company said the usual approval process could take a few weeks to several months.
A spokesperson for Hg told CoinDesk that while minimum investment amounts should be lower than at current private investment platforms, only institutional or accredited investors can participate at launch.
Further, individual investors would have to participate through one of the exchange’s members.
‘Real world use cases’
Zilliqa operates what it calls a “high-throughput public blockchain platform,” and claims to solve scaling issues with sharding, which breaks the main blockchain up into separate, smaller units to more efficiently process transactions. (Sharding is on the scaling roadmap for ethereum, the world’s second-largest blockchain, but is estimated to be two years away.)
“Rather than blockchain for blockchain’s sake, it’s important to look at how blockchain technology can solve existing challenges holding industries back,” Zilliqa co-founder and CEO Xinshu Dong said in a statement. “Within the private investment industry, blockchain can provide greater standardization, fractionalization, and enables trading on a regulated venue at lower costs.”
“Our aim is to continue to focus on real-world use cases to accelerate the mainstream adoption of blockchain, and move the industry towards meaningful growth.”
MaiCoin, meanwhile, is a digital asset exchange platform that offers both trading and payment services out of Taiwan. It will build the exchange functions, including the matching engine and order book.
On the user side, MaiCoin will be providing multi-factor authentication and transaction signing technologies to ensure security.