Plans are underway to launch a security token blockchain by the Russia’s National Central Depository (NCD) next month. However, the digital asset ledger will be based in Switzerland, more than 5,000 kilometers from its headquarters in Moscow.
The project has been in the pipeline since 2017, and the Moscow Exchange’s subsidiary has settled on Switzerland as the ideal destination to launch the D3ledger. According to the project’s head of innovation at NCD, Artem Duvanov, Switzerland’s regulations are favorable for marketing digital assets.
“In terms of laws, [Switzerland] allows the tokenization of at least some kind of securities. That’s the first thing. And it’s favorable for such things because there is market demand.”
D3ledger Role in Crypto Market
The D3ledger will play a major role in tracking a digital ownership. As a security token, it will represent unregistered shares in a small health care company, Sora, which is a digital currency developed by a Japanese tech company, Soramitu. Other coins to be tracked are BTC, ETH and any ERC20 token that rides on the Ethereum ecosystem.
However, for Ethereum and Bitcoin, assets will be in the form of depository notes. This is similar to how foreign company stocks are traded by the exchanges in the United States. Simply put, Duvanov clarifies:
“When you say you have some bitcoins in our platform, you actually have some depository receipts for bitcoins which are held by D3ledger platform.”
The process involves freezing digital assets on a public network using multi-sing smart contracts. Once frozen, a rights-to-token is issued on the D3ledger platform. Duvanov commented:
“The idea behind D3ledger is a combination of the public network and a private network; slow public network and fast private network. This method of holding them is distributed so there is no custody risk like if you store your bitcoins on an exchange.”
He went on, saying:
“The next step will be adding a reputable stablecoin to D3ledger to enable over-the-counter (OTC) crypto transactions without counterparty risk and delivery-versus-payment of securities trades, meaning both sides of a trade are completed simultaneously. We will include an established connection with some stablecoin, like Gemini coin or some coin backed by dollar or euro.”
NCD acts as the Russian Stock Exchange back office and has borrowed a leaf from Deutsche Börse which settled on Switzerland to launch their trial token. The country has become a crypto haven and the local regulations tend to favor the blockchain industry.
What’s more, the National Switzerland Stock Exchange (SIX) is in the processes of developing its native crypto trading and tokenization outfit, the SDX (“SIX Digital”). SDX and SIX will aid in tokenizing bonds and stocks later this year before moving to tokenizing physical assets.
SDX however has a soft spot for Security Token offerings (STOs) and there is a lot of anticipation that SIX will get its funding partly through an STO.
Switzerland Reputation in Tech Matters
Switzerland has what it takes when it comes to looking after and securing assets in an environment surrounded in privacy. Cryptographic key storage is very important, and these are some of the factors, besides global visibility, of more startups heading to the country.
However, the Swiss law is not cast on stone, and the new technology might see the government rethinking its existing laws in the near future. This prompted Duvanov to give his suggestion:
“There are some proposals for new laws which I think are driven by the SIX project. I am pretty sure because I see proposed changes which are meeting the requirements of SDX. I think the SDX project will drive changes in Swiss law and so everybody will follow.”
A representative from SIX however notes the exchange “is in close contact with the relevant regulators. So I would not call it ‘driving changes in the law’ but rather being the sparring partner in order to help address issues/questions/challenges that must be considered and represented in a potential law.”
He concluded, saying:
“It was not an unexpected development that others were coming to Switzerland to explore digital assets in a regulated manner. The fact that more and more infrastructure providers are moving into this area confirms that we are on the right track.”