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1、Digital Asset Tokenisation in Asia PacificThe trends,challenges,and opportunities that will define Asias Digital Asset sectorA report from Kapronasia in collaboration with Chintai September 2022ContentsExecutive Summary 3Introduction 4The Traditional Capital Markets Ecosystem 5Digital Asset Tokenisa

2、tion 7The Potential of Digital Asset Tokenisation 9Asset Digitisation in Asia Today 11The Future of Digital Assets in Asia 14Conclusion 17Methodology Kapronasia conducted both primary and secondary research in Asia-Pacific to obtain the most relevant insights from the industry around digital asset t

3、okenisation.Secondary Research:Sources included but were not limited to,market intelligence reports and studies by industry experts and professional services networks,white papers,educational materials,media articles,and marketing collateral.Primary Research:Interviews were secured from relevant pla

4、yers across the ecosystem,including financial institutions,Fintechs,and industry experts.All values are in U.S.dollars($)unless otherwise noted.Executive Summary Financial markets are largely efficient in allocating capital by bringing investors together with those who require funding.However,there

5、is widespread acceptance that technology can make the process of originating,exchanging,and maintaining assets more efficient by reducing cost and complexity across the value chain while at the same time increasing market access.One of the more promising technological use cases is digital asset toke

6、nisation which effectively fractionalises a physical or virtual asset into multiple so-called tokens,each typically conveying ownership rights to the underlying asset.The tokens can later be traded either privately,or on one of many secondary markets that have developed.Digital asset tokenisation ai

7、ms to remove some of the inefficiencies in the traditional financial markets operating model,with key improvements to asset origination,trade execution and the ongoing maintenance of financial securities.There is a raft of digital asset tokenisation activity across Asia as many entities are developi

8、ng and launching new tokenisation platforms.These players range from traditional institutions such as banks and exchanges through to ambitious startup Fintechs looking to disrupt the existing modus operandi.Whilst this technology has clear benefits,the future state of digital asset tokenisation in A

9、sia is open to a wide spectrum of possibilities.At one end,we could simply see todays incumbents deploy new technology to handle digital assets in their existing markets and maintain market share.At the other end is,potentially,a decentralised network of Fintechs serving clients with a range of nich

10、e digital asset products and services.A third alternative is a model somewhere in the middle,where many of these entities operate in a federation of some sort.There are several factors which will have a bearing on whether tokenisation achieves widescale adoption.Top of the list is,quite simply,ensur

11、ing adequate supply of and demand for these assets as,currently,the demand for digital assets is a bit unclear and there are only a few firms that have cracked the nut on creating them.Demand can be aided by building trust in underlying assets and platforms,which will be helped by strong and sensibl

12、e regulation.Ultimately,if a substantially improved client experience is realised,a positively reinforcing cycle may develop as markets deepen and tokenisation becomes more mainstream.Regardless of the exact landscape,market participants would do well to take these dynamic developments seriously as

13、digital asset tokenisation is likely to be an increasingly important element of financial markets.As more platforms are deployed,investors and issuers will take business to those places offering the most efficient means of conducting their activities.Accordingly,there is opportunity for those able t

14、o capitalise on this technological development.3Digital Asset Tokenisation in Asia PacificIntroduction In recent years,blockchain has become something of a buzzword in financial markets.Proponents suggest that blockchain technology can enhance many of the inefficiencies in todays capital markets by

15、streamlining processes,creating operational efficiencies and helping new entrants gain access to finance thereby democratising financial markets.One of the more promising use-cases of blockchain technology is the ability to represent traditional assets on blockchain which is known as digital asset t

16、okenisation.There is general market consensus that the processes within the existing operating model of capital markets,covering asset issuance,settlement,and ongoing asset maintenance,contain many inefficiencies,unnecessary intermediaries,and redundant manual processes.Digitalising financial assets

17、 on a blockchain promises to significantly impact this model in a few ways.Firstly,the creation of digital assets can improve the modus operandi by potentially creating a more efficient asset issuance process.Next,digital assets can typically be traded with a higher degree of operational simplicity

18、than traditional assets.Finally,the availability of digital assets potentially opens markets to both new asset issuers and investors,this applies to primary issuance and further makes the entire secondary market more accessible.There is a high degree of interest in this evolution;existing incumbents

19、 and a raft of new entrants are taking tangible steps and have made sizeable investments to create new solutions.This said,there are challenges.A better operating model and enhanced platforms on which assets can be issued and traded,do not automatically translate to increased asset demand and additi

20、onal market liquidity.Additionally,as with any new technology there is,to a degree,a wait and see approach taken by many participants as the business and regulatory landscape evolves.Finally,there is a significant knowledge gap in terms of understanding the ins and outs of transitioning to digital a

21、ssets and the pros and cons of doing so.This knowledge gap is driven by many factors including the nature of blockchain,which is constantly evolving,and the introduction of various regulatory guidelines.4Digital Asset Tokenisation in Asia PacificThe Traditional Capital Markets EcosystemTraditional c

22、apital markets have developed over decades to what they are today,and yet,despite their evolution,the purpose remains roughly the same:provide capital to companies and entities in the most efficient way possible.The capital markets operating model can be broadly broken into three segments or process

23、es:Origination/Issuance,Execution/Settlement,and Maintenance Process(Figure 1).Although this model of capital markets has been in existence for some years,it is clearly not as efficient as it could or should be.There are several seemingly unnecessary intermediaries,and redundant manual processes acr

24、oss each of the steps of the operating model.OriginationAsset origination is the multistep process by which assets are brought to either public or private markets.Assets might include,for example,ownership in a company,a fund holding a portfolio of bonds,or a physical asset such as real estate prope

25、rty or gold bullion.The result is that an investor(purchaser)and asset issuer(seller)are brought together to transact and transfer ownership of the asset in question.In this step,a process involving multiple stakeholders and intermediaries within the traditional origination process,there are several

26、 challenges.Mark Leahy,Chief Operating Officer at TrumidXT,an Asian electronic bond platform,argued that credit markets in particular are often disjointed,and the price discovery mechanism is imperfect:“these markets have suffered from a lack of innovation by the incumbents over time such that trans

27、actions can often rely on personal relationships,phone calls and online chat rooms.”On the supply side of the transaction,issuing securities is challenging and can be expensive,exclusive and difficult for smaller or esoteric issuers/projects to participate in,which can then limit firms ability to ra

28、ise capital and grow their business.Figure 1-The Capital Markets Operating ModelOrigination/Issuance Sellers and buyersof assets are brought together in a market.Activities include due diligence and marketing of assets.Execution/Settlement Transactions are confrmed,documented and funded.Asset Owners

29、hip is formally transferred from one party to another.Maintenance Ongoing asset management activities are managed.Activities include custody;conducting corporate actions such as dividend and loan payments.This Figure is for illustration and may exclude certain elements found in particular processes

30、or value chains.5Digital Asset Tokenisation in Asia PacificExecution/SettlementExecution of a trade refers to the process through which transactions are documented,funded and ownership is physically passed from seller to buyer and housed with an appropriate custodian.A primary concern for market par

31、ticipants is the risk of trade failure throughout the convoluted trade execution process.Today,for example,a trade requires at least a broker,a custodian,and a settlement agent,all of which increases the risk of trade failure at each step.Should any of these participants fail to execute as agreed,th

32、e trade can fall apart.Furthermore,trades have long settlement periods due to the complex number of steps,leading to an inefficient allocation of resources.Rehan Ahmed,Chief Product Officer at Marketnode,a venture backed by Singapore exchange SGX,noted that“in some loan transactions,settlement requi

33、res physical signatures and papers,resulting in settlement periods of more than 30 days.This is despite the relevant parties wanting to settle more quickly”.MaintenanceAfter an asset has been originated and settled,it requires some level of ongoing maintenance.For example,corporate actions such as d

34、ividend/loan payments,stock splits and voting need to be correctly processed;the record of ownership needs to be duly maintained and the shares custodised.Many parts of this process are conducted manually via cumbersome processes today.Another concern noted by many participants is that the transfer

35、of asset ownership in illiquid markets can be a lengthy and difficult process,for example,ownership in a venture capital project.This can mean that an owner who would like to exit an investment ahead of its original maturity is prevented due to administrative difficulties.Tim Koo,a Partner at Audacy

36、 Ventures,a Hong Kong based fund management company,agreed elaborating,“as projects progress,investors may wish to exit due either to the success or failure of the underlying project which may not always be operationally possible,or only possible with a substantial haircut administered by the issuer

37、.”The challenge of issuing traditional structured notesSamuel Woo from ICHAM Pte.Ltd.highlighted the inefficiencies occurring at each step of the capital markets operating model with reference to the lifecycle of Structured Notes.First,an investor wanting a structured note needs to employ a broker/w

38、ealth manager to purchase the product which entails additional cost that would not be present if the investor could purchase directly.Second,maintenance is not perfect given the secondary market today for this type of product is small,it is therefore difficult for investors to sell should they decid

39、e to and are largely at the mercy of the issuer when it comes to pricing.6Digital Asset Tokenisation in Asia PacificDigital Asset Tokenisation The recent rise of digital asset tokenisation on blockchain promises to revolutionise the current operating model in a few ways with the ultimate aim to make

40、 market access more open and existing processes more efficient.Digital asset tokens typically represent ownership of an asset which has been tokenised.Oftentimes,tokenisation will result in fractional ownership of the asset although it is not strictly necessary to have multiple tokens.These tokens a

41、re recorded on a blockchain,where the entire ownership and transaction history of the digital asset is maintained.Effectively tokenised digital assets are a new asset class whereby the tokens represent ownership of the digital asset-backed securities or other meaningful assets of tangible value.Ther

42、e is no practical limit to the type of assets which can be digitally tokenised.The entire gamut of asset classes could potentially be fractionalised:corporate bonds and shares,real estate assets,precious metals,intangible assets such as carbon credits,and more exotic assets such as wine,whiskey and

43、rare art pieces.The digital nature of the assets also allows for smart contract functionality to be programmed directly into products.Whilst it is not a necessity for a token to have smart contract features,processes can be simplified in some cases if an asset automatically acts in a particular way

44、should certain events come to pass.For instance,a digital asset could be programmed with functionality to automatically transfer ownership of collateral in the event of non-performance.Once an asset has been tokenised on an appropriate platform,its tokens facilitate a more easily accessible secondar

45、y market similar to equities on a traditional exchange with benefits such as instant settlement.Naturally,demand needs to exist to provide liquidity and it is hoped platforms with easy access will be a driver to help these secondary markets develop.In summary,a tokenised asset is backed by a real-wo

46、rld asset such as a real estate property or government bonds.It is reviewed by auditors,and all relevant legal documentation should be in place.Whilst the underlying asset may be tangible or intangible,the tokens bear ownership rights to that asset and the ownership has been subject to external audi

47、ts and compliance processes.Cost of IPO under traditional finance modelFigure 2 shows the estimated costs of an IPO under the traditional finance operating model.Using digital asset tokenisation will reduce some,of these costs,albeit the more moderate elements such as exchange registration and ongoi

48、ng custody/trading fees.Many of the accounting and due diligence costs will remain and more specifically,the largest element of underwriting fees will in many cases continue to be required to ensure the full sale of the asset.This said,as noted previously,the benefits of tokenisation extend beyond s

49、imple cost by potentially providing a means of entry to capital markets for entities previously unable to access them.7Digital Asset Tokenisation in Asia PacificThis Figure is for illustration purposes and includes key fees/charges,smaller elements may be excluded.1 1 Source:Kapronasia&Chintai analy

50、sis,PWC8Digital Asset Tokenisation in Asia PacificThe Potential of Digital Asset Tokenisation1 The Business Times:https:/.sg/garage/kkr-partly-tokenises-new-us4b-tech-fund-on-singapores-addx2 HSBC:https:/.sg/en-sg/insights/innovation-and-transformation/fixed-income-digital-assets-unpacking-digital-b

51、ond-issuance;DBS:https:/ News Singapore:https:/fintechnews.sg/51857/blockchain/uob-issues-digital-asset-offering-of-s600-million-on-marketnodes-platform/Digital asset tokenisation has the potential to significantly impact the way that capital markets operate.By reducing the need for intermediaries a

52、nd manual intervention,tokenisation simplifies the process of asset issuance,increases efficiency,and lowers costs across the entire capital markets operating model.At the same time,it opens up access to more market participants.OriginationDigital asset tokenisation can simplify the process by which

53、 assets are brought to market and make origination more efficient.This manifests in a more optimal origination process with several benefits for both issuers and buyers.One of the benefits is the cost savings which can be passed on to issuers.The efficiency which digital asset tokenisation,via block

54、chain,presents for financial institutions and exchanges results in less expense for issuers to access markets.This can bring down the barriers to entry and allow smaller and more niche projects to raise funding that they may not have been able to tap into from traditional markets.It should be noted

55、that whilst tokenisation indeed reduces costs,some such as underwriting,remain relatively large,and if required,may still constitute a meaningful expense in the overall context of a transaction(See Figure 2).On the buyer side,tokenisation can increase market access for smaller investors.In May 2022,

56、Global Private Equity fund manager KKR&Co used the ADDX platform to raise a portion of a USD 4 billion technology fund.As a result of the tokenised structure and the efficiency gains brought about by the blockchain technology,the minimum investment size was US$20,000 as opposed to more than US$120,0

57、00 which is typical in traditional markets for such a structure.1 The ability to purchase smaller lot sizes also benefits investors as it gives them more flexibility in the assets they can purchase and enables them to better optimise their portfolios.The Head of Structuring from a large Asian Wealth

58、 Manager supported this thinking and further opined that“the ability to purchase tokens potentially increases the universe of securities which can be utilised to appropriately diversify a clients investment portfolio.”Also,digital asset tokenisation can create a more transparent market for the tradi

59、ng of assets,where buyers and sellers can see clear pricing and volume information.Several large banks in Singapore,including UOB,DBS and HSBC,are beginning to offer solutions whereby bonds can be directly issued in a digital tokenised form,effectively acting as a fractional bond exchange.2 This pro

60、vides investors with instant access and Notable digital token activity in Asia In a first for Singaporean banks in May 2021,DBS issued a tokenised bond on its digital platform.Amongst other benefits,this bond was traded in lots of$10,000,substantially lower than the$250,000 lots typical for such an

61、offering.Korean firm Kasa tokenised and listed several commercial properties on its platform including large offices in Seoul during 2021.Investors can buy relatively small tickets sizes and the firm aims to be able to sell tokens valued at only a few dollars.Singapores national telco,Singtel,partne

62、red with UOB,a bank and ADDX,a digital asset platform to issue a US$100 million,five-year digital Sustainability-Linked Bond(SLB)in April 2022.9Digital Asset Tokenisation in Asia Pacifictransparent pricing on the platforms.It is hoped that as the market evolves,additional bonds will be made availabl

63、e to a wider range of potential investors.Execution/Settlement As we have discussed,settlement can be a lengthy,time-consuming process.Under a tokenised framework,settlement can be near instantaneous,or atomic in the lingua franca of the market.Again,tokenisation offers advantages to the execution p

64、rocess over traditional methods.Top of the list of settlement advantages is that atomic settlement reduces counterparty risk dramatically and at the same time speeds up settlement.If cash and assets are immediately transferred,there is negligible risk of either party failing to fulfil their obligati

65、ons which is a vast improvement on what happens today.The settlement process can be further strengthened by codifying various regulatory compliance requirements directly into smart contracts which can increase accuracy and reduce settlement time.For example,tokens can be programmed only to be transf

66、erable to certain wallets which can then ensure that tokens are only transferred to counterparties in jurisdictions that are permitted to hold the asset.Maintenance The ongoing day-to-day maintenance of assets often requires manual human intervention.Digital asset tokenisation aims to substantially

67、automate much of this process reducing both risk and complexity.Several specific areas within the maintenance of assets have potential to be remedied.Features such as dividend or interest payments can be programmed into smart contracts on an asset thereby automating these processes.Whilst this type

68、of Straight Through Processing(STP)can,to an extent,be implemented today,banks and exchanges still maintain large back-office operations teams to manage corporate actions.New companies such as Marketnode and Chintai,aim to offer a market utility service making many of the traditional maintenance pro

69、cesses redundant.Andrew Han,Director of Business Research at Fireblocks,a digital technology provider,also agreed and noted further that“Debt covenant and ratings information can be programmed in to smart contracts bringing a higher level of structure to the security.”10Digital Asset Tokenisation in

70、 Asia PacificAsset Digitisation in Asia Today3 SGX:https:/ firms in Asia,including banks and non-banks,are developing technology and platforms in the digital asset tokenisation ecosystem.The level of activity is high as many challengers look to cash in on the perceived lack of innovation emanating f

71、rom existing incumbent financial institutions and disrupt the status quo in the region.Meanwhile,incumbents,such as exchanges and large banks have reacted by developing their own digital asset infrastructure.Against this backdrop,several startups and incumbents are partnering on the journey.They see

72、 the development of new markets as more than a simple zero-sum game and are keen to leverage each others strengths.IncumbentsMost incumbents in Asias markets are creating digital asset capabilities.Mr Han from Fireblocks,commented that“the driver for this is,to a degree,demand from their clients as

73、financial institutions want to both protect their existing business and capture new business as a result of newly created asset classes.”Incumbents also have a cost saving incentive if technology can reduce headcounts and are developing tokenisation capabilities both by investing in new ventures and

74、 building their own products.SGX in Singapore,for example,is participating in several ventures,and while it remains to be seen how successful each of these ventures will be,a number are already live.Some of these include a nascent market utility built by Marketnode and electronic bond trading platfo

75、rm by TrumidXT.Meanwhile large banks across the region are also taking seriously the evolving digital asset tokenisation landscape,with many building infrastructure to cater for client demand.For example,in 2020,global giant,HSBC,working with the Singapore Exchange(SGX),tokenised a S$400 million,5.5

76、-year public bond issue and a follow-on S$100 million tap of the same issue by food and agribusiness supplier Olam International.3 ChallengersThe Asian financial industry has been a key center of Fintech development and asset digitisation is no exception.National regulators are becoming more accepti

77、ng of these challengers and have licensed various newly established businesses.Singapore,for example,has been a hive of activity in the establishment of new asset tokenisation outfits.These include Singaporean digital asset marketplace Chintai,who received licensing from the MAS in August 2022.This

78、permits them to issue securities and units in Collective Investment Schemes(CIS)or Funds.Chintai provide a platform encapsulating the complete chain of investment activities from asset origination The case for tokenising carbon creditsThe market for carbon credits is today rather fragmented.Companie

79、s wishing to offset their carbon footprint buy buying carbon credits rely on a network of expensive brokers and retailers which can add margins of up to 30%in a complex and opaque market.JustCarbon,using Chintais technology,are attempting to overcome these issues by providing a platform whereby,once

80、 credits have been independently verified,they can be actively traded.When the credit is removed from circulation,or burned it will constitute a pollution offset by the owner.11Digital Asset Tokenisation in Asia Pacificthrough to ongoing maintenance of the asset.In a similar vein is SDAX,a digital a

81、ssets exchange for tokenisation and trading of asset-backed digital securities via a blockchain powered platform,also licensed by the MAS.Meanwhile,BondEvalue,a Singapore-based fintech that specialises in bond market technology,was founded in 2016 with the vision to make bond markets more transparen

82、t and accessible.PartnershipsAs the Asian digital asset market develops more start-ups are eschewing a go it alone strategy and developing partnerships with incumbents to have the best of both worlds a dynamic start-up with the latest technology,combined with the established controls and distributio

83、nal firepower of an incumbent.For example,in March 2022,private market investment firm,Hamilton Lane and digital securities exchange ADDX partnered to tokenise a class of shares in Hamilton Lanes Global Private Assets(GPA)Fund.The GPA fund will be accessible to ADDX investors at a minimum ticket siz

84、e of US$10,000,compared to the minimum of 4 ADDX Hamiliton Lane:https:/addx.co/files/Hamilton_Lane_ADDX_Press_Release_738a3a63a2.pdfUS$125,000 or more for investors who subscribe via traditional,non-tokenised distribution channels.4 With all these benefits in mind,it is worthwhile to examine what ma

85、rket participants should consider when deciding whether tokenising their assets is a sensible approach.Whilst some projects have nuances requiring unique solutions,Figure 3 provides potential issuers a framework of items for consideration before making the decision to tokenise their assets.Democrati

86、sing real estate investmentReal estate developments are often too large for individual investors.Real Estate Investment Trusts(REITs)offer one avenue however these can be expensive to transact.Companies such as Fraxtor in Singapore and Kasa in Korea look to democratise this investment by tokenising

87、large property developments,both commercial and residential,giving investors across the entire spectrum of wealth the opportunity to buy small fractions of specific projects for a small fee.12Digital Asset Tokenisation in Asia PacificAssess business model including value creation,disruptive nature,s

88、calability,sustainability.Assess how token can be integrated into wider tokenomic ecosystem&provide a value-added proposition.Assess whether tokenisation offers a streamlined/cost-effective route to market.Identify shortcomings in the traditional model which rule that out.Address gaps and issues ahe

89、ad of potential tokenisation process.E.g.whether additional financial reporting processes are required.Ensure management team/current owners are aligned on strategy.Tokenisation Business Case AssessmentUndertake appropriate due diligence,including relevant financial legalauditing and regulatory requ

90、irements.Full independent legal assessment of the token to ensure correctcategorisation.Establish the underlying compliance rules and geofencing approach canbe appropriately applied to an issuance or secondary market.Identify appropriate platform/exchange.Consider cost,ease oftransaction/ongoing tra

91、ding,and maintenance.Determine whether underwriting is required.Pre tokenisationLaunch tokenisation on relevant exchange.If full sale is achieved or exceeded,consider issuing further tokens.If full sale is not achieved,revisit marketing to investors and attempt to raisefurther capital.Deploy marketi

92、ng campaign to the dedicated target audience in theapproved jurisdictions.Token LaunchMonitor secondary market trading activity.Undertake further issuance or trading if required.Ensure adequate communication to token holders is in place,potentially an investor relations team is required.Maintain pro

93、cess to ensure adherence to ongoing regulatory andother reporting requirements.Ongoing MaintenanceFigure 3-Framework for Issuers to Assess Digital Asset Tokenisation13Digital Asset Tokenisation in Asia PacificThe Future of Digital Assets in Asia The success of the digital asset market is far from cl

94、ear and market participants have a wide set of views and naturally have a proclivity towards their sphere of operation.There are several factors which will influence the future lie of the land and three potential market scenarios:consolidation,fragmentation,or a hybrid.At one end of the spectrum,we

95、could see a consolidated market with established institutions such as SGX,DBS,and HSBC maintaining their existing business lines.These could either build their own digital asset tokenisation platforms in-house or acquire existing challenger digital asset platforms.Either way,the argument here would

96、be that the established incumbents end up dominating the market while the challengers get pushed out.Under this scenario,a range of service providers could enter the fray to service the incumbents business.For example,Marketnode could act as a market utility providing the necessary post-trade and as

97、set servicing infrastructure.At the other end of the spectrum would be a completely decentralised market.In this view we could see asset issuers eschew traditional institutions and operate on one of the many new and varied asset exchanges such as SDAX or BondbloX.Perhaps these new entities will form

98、 a federation of sorts where assets could be transferred across platforms if such interoperability can be established.However,this interoperability raises questions as to why individual members would want a federation as presumably it would reduce the revenue stream for one member when assets are tr

99、ansferred on to another members platform.The final,and potentially most likely scenario is that we see a hybrid where we have traditional providers controlling a significant share of the market with 3rd party providers filling in the gaps.Drivers of Digital Asset Tokenisation in AsiaRegardless of th

100、e exact structure of the market,asset tokenisation technology is seemingly here to stay in some form.The success or otherwise of asset tokenisation will be impacted by factors such as the simple dynamics of supply and demand,improved client experience,trust and confidence in tokenised assets,and tec

101、hnological talent.Supply and DemandUnderpinning market growth is straightforward supply and demand.The jury remains out as to the extent to which entities want to conduct business using digital asset tokens on both sides of the supply/demand equation.14Digital Asset Tokenisation in Asia PacificSuppl

102、y refers to asset owners/issuers,who own/issue assets such as corporate bonds,equities,precious metals,carbon credits,or structured notes.In all cases,whether this supply materialises depends on the degree to which tokenisation platforms offer issuers a credible,profitable path to market with their

103、assets which is better than the status quo.Currently,it is unclear whether the supply of appropriate assets to be tokenised will ensue in volumes sufficient to make a meaningful difference to the digital asset tokenisation market.As Mr Ahmed from Marketnode noted if an asset was so pristine as to wa

104、rrant listing on public markets,it would most probably already be listed and not require an alternative exchange.Demand refers to the full spectrum of investors who might wish to buy tokenised assets.This includes institutional investors such as fund managers and banks,high net worth individuals and

105、 family offices through to more moderately wealthy and retail investors,where permitted.A current constraint holding back investors is that liquidity is largely insufficient.That prevents the creation of meaningful secondary markets for investors to buy and sell tokenised assets.Therefore,many inves

106、tors are taking a wait and see approach.Tim Koo from Audacy Ventures stated that whilst he and his clients would be interested in using tokenised securities,their present reluctance is partly driven by a lack of liquidity in tokenised markets.In sum,there is presently a scarcity of buyers for many d

107、igital assets.This leads to very wide buy/sell spreads,i.e.an inefficient market.Improved Client ExperienceBankers from large Asian Banks,whose clients include high net worth individuals,told us that most investors are more concerned with respect to the return on a specific investment as opposed to

108、the precise form of an investment.The mere fact that an asset is tokenised is of less consequence to investors.Therefore,if the market for tokenised assets is to develop,the client journey must be orders of magnitude superior to the present set up.An illustrative example of how asset tokenisation co

109、uld improve the customer experience involves Private Banks.These banks today might be reluctant to give a margin loan to customers secured by an investment in a private equity fund as realising the collateral in the event of default may be difficult.If these assets can be tokenised and traded on tra

110、nsparent exchanges,banks may lend against these tokens thereby not only providing a better customer journey but also growing the overall market by allowing their clients to invest in more tokens using leverage.In the same vein,if asset tokenisation platforms can provide market access to issuers of a

111、ssets that otherwise would not have been able to tap into public markets or if it can broaden the access to asset classes that were previously out of reach to all but the biggest institutional investors,an inflection point could develop.Trust and Confidence in Tokenised AssetsTrust and confidence in

112、 tokenised digital assets will need to be built and must not falter.The market must develop an understanding and reach a level of acceptance that digital asset tokenisation is a sensible way to transact business.One way this confidence may develop is with sound regulation.This will provide certainty

113、 and confidence for both issuers/investors and platforms alike.Similarly,clear regulation has the potential to grow the supply side as it will give financial institutions more confidence that they can develop platforms and products without committing a regulatory faux pas and suffering not only mone

114、tary penalties but also associated reputational damage.15Digital Asset Tokenisation in Asia PacificMany market participants encourage strong regulation which is both supportive of the development of new products whilst maintaining requisite investor safeguards since it encourages both innovation and

115、 helps the market develop faith in tokenised assets.Finally,most regulators permit a certain class of investor to participate in tokenised markets.In Singapore for example,the Monetary Authority of Singapore restricts this to accredited investors and institutional investors,essentially the segments

116、best able to withstand potential risk associated with a new asset class.Tech TalentLastly,as these asset tokenisation markets and technologies are new,it naturally follows that technological know-how is limited.There is strong demand for technological talent with the ability to build quality tokenis

117、ation platforms.There is a particular dearth of human resources with both the relevant understanding of regulatory requirements,for example anti money laundering and combating the financing of terrorism rules,combined with strong technological/business skills.This race for talent operates not only a

118、t the micro firm level,but also at the wider Asia regional level.People are mobile and will move to Europe or North America if they see better opportunities.Hence,to develop quality platforms in Asia requires the region to remain competitive in the global marketplace for skills.Simplifying precious

119、metal investment through tokenisationMany investors desire the ability to securely purchase gold and other precious metals for various reasons including hedging against inflation and diversifying their portfolio.They would like to do this with minimal transaction feesIn Australia,digital asset techn

120、ology provider Trovio has designed a potential solution by partnering with the Perth Mint to issue the Perth Mint Gold Token(PMGT);the first digital gold token on a public blockchain which is ultimately backed by government guaranteed gold.16Digital Asset Tokenisation in Asia PacificConclusionThe mo

121、dus operandi of Asias capital markets today has room for improvement.The traditional processes of raising capital and managing assets has room for improvement,particularly so considering the ongoing possibilities from digital enhancements.Digital asset tokenisation on blockchain offers a solution to

122、 this by streamlining many operating processes and bringing investors and issuers closer together.The benefits range from a reduction in complexity and cost and through to greater financial inclusion by offering financial market access to a wider array of clients.Change is a certainty although the p

123、recise market layout remains to be seen.Tokenised asset products are still relatively nascent albeit this is changing as entities across the spectrum look to develop products and platforms.One view is that incumbent banks and exchanges will continue to dominate markets while adding new asset classes

124、 to their offerings using digital token platforms.An alternate view is that the raft of startup fintech challengers will dislocate the status quo and lead to a more decentralised market.Whatever the end state,as we have seen,incumbents and challengers are active and needed in the tokenisation space.

125、The market is dynamic and expanding as more assets are being tokenised.Market participants should take these developments seriously else risk being left behind.Incumbents should stay close to their clients.The more clients demand tokenised products,whether driven by investment opportunity or ease of

126、 transaction,the more such assets will be required.In this event,incumbents will need appropriate platforms to facilitate this client demand.Platform owners must find ways to differentiate themselves from other similar services.Several platforms have been launched in Asia offering digital asset toke

127、nisation.For these to be successful,they will need to continue innovating and offer more than a simple execution only platform which can be easily replicated.Asset managers and investors should monitor developments in tokenised offerings from both incumbents and from challengers such as Chintai.Trad

128、itional finance companies can embark on pilot projects as part of the product development process in digital asset tokenisation.Over time,as these products and associated regulatory frameworks mature and potentially become more mainstream,the universe of investible assets can increase.To be sure,the

129、 quality of the underlying asset still needs to be given an appropriate assessment,however,undoubtedly a wider selection of investible assets is becoming available to more people.Disclaimer:All opinions and findings expressed do not reflect the opinion of Chintai Network Services Pte.Ltd.or their af

130、filiate companies.Chintai has no control over the content published and accepts no responsibility for them or any loss or damage that may arise from the use of the content.Nothing in this material shall be deemed to be a direct or indirect provision of investment management services or advice specif

131、ic to any parties.17Digital Asset Tokenisation in Asia PKapronasia is a leading provider of market research covering fintech,banking,payments,and capital markets.From our offices and representation in Shanghai,Hong Kong,Taipei,Seoul,and Singapore,we provide clients across the region the insight they

132、 need to understand and take advantage of their highest-value opportunities in Asia and help them to achieve and sustain a competitive advantage in the market.Please visit https:/ 2022 Kapronasia Singapore Pte.Ltd.All rights reserved.Chintai is a Singapore company regulated and licenced by the Monet

133、ary Authority of Singapore.Founded in 2019,the Chintai platform utilises blockchain technology to modernise capital markets for banks,financial institutions,and asset managers.The end-to-end solution offers traditional finance companies a one-stop platform with a robust automated compliance engine p

134、owered by our proprietary solution Sentinel-AI.Chintais product suite includes dynamic issuance,automated compliance,reporting,data reconciliation,cap table management,automated corporate actions,liquidity,instant settlement,and more.The strategic intent is to bridge the world of traditional finance with a blockchain technology platform and build a new competitive advantage with our clients.Chintai-Transforming capital markets today into blockchain opportunities of tomorrow.Please visit:https:/www.chintai.io For more information:hellochintai.io