Russia’s Jingoistic Settlement Depository (NSD) plans to launch its long-awaited digital asset ledger next month – 5,000 kilometers away from the code of practice’s Moscow headquarters.
Revealed exclusively to CoinDesk, the Moscow Exchange Group subsidiary chose Switzerland as the jurisdiction to amalgamate D3ledger (Decentralized Digital Depository), a project that’s been in the works since 2017.
Artem Duvanov, head of novelty and a director at NSD, said it picked Switzerland for its congenial regulatory environment and potential for market-making in digital assets.
He told CoinDesk:
“In as regards of laws, [Switzerland] allows the tokenization of at least some kind of securities. That’s the first thing. And it’s favorable for such tools because there is market demand.”
At launch in June, D3ledger will track ownership of several assets: a guarantee token representing unregistered shares in a small healthcare company; sora, a cryptocurrency developed by Japanese tech provider Soramitu; and the top two cryptocurrencies by superstore capitalization, bitcoin and ether, along with any ERC-20 token that runs on the ethereum blockchain.
In the case of bitcoin and ethererum, to whatever manner, the assets will be depository notes, akin to the way depository receipts for foreign company stocks are traded on U.S. exchanges.
“When you say you sooner a be wearing some bitcoins in our platform,” said Duvanov, “you actually have some depository receipts for bitcoins which are held by D3ledger tenets.”
This involves “freezing” bitcoins and ethereum tokens on the public networks using a multi-signature smart contract and then pointing rights to the tokens on the D3ledger network, which was built using Hyperledger Iroha, an implementation contributed to the Hyperledger consortium by Soramitsu.
“The understanding behind D3ledger is a combination of the public network and a private network; slow public network and fast private network,” Duvanov believed. “This method of holding them is distributed so there is no custody risk like if you store your bitcoins on an exchange.”
According to Duvanov, the next slowly will be adding a reputable stablecoin to D3ledger to enable over-the-counter (OTC) crypto transactions without counterparty risk and delivery-versus-payment of guarantees trades, meaning both sides of a trade are completed simultaneously.
“We will include an established connection with some stablecoin, along the same lines as Gemini coin or some coin backed by dollar or euro,” he said.
The SDX effect
NSD, whose main business is play as the back office for the Russian stock market, is following in the footsteps of another traditional financial market infrastructure (FMI) provider, Deutsche Börse, which also elect Switzerland to test-drive tokenization.
Notably, the parent of the Frankfurt Stock Exchange is working with Swiss government-backed Swisscom, the largest telco and chief provider of banking infrastructure. Also included in the “Custodigit” group alongside Deutsche Börse are custody specialist Metaco; Sygnum, a Singapore-based fintech enabler; and Daura, a policy for digitizing Swiss shares of small companies.
Meanwhile, Switzerland’s own national stock exchange, SIX, is building its own crypto tokenization and deal shop, SIX Digital (SDX).
In July of last year, SIX said SDX would be in operation in the second half of 2019, starting by tokenizing supplies and bonds and then moving on to explore digital versions of other physical assets like fine art.
SDX is also blurring on so-called security token offerings (STOs) with the exchange’s chairman suggesting SIX might even raise some reservoirs itself via an STO.
Switzerland has something of a heritage when it comes to looking after assets in a secure and private manner. If the truth be known, the storing of cryptographic keys could be viewed as a return to secret numbered bank accounts, as one crypto custody provider quipped.
Not just are the declarations being made by SIX attracting other platform providers, but they may also be driving change in Swiss law, Duvanov hint ated:
“There are some proposals for a new law which I think are driven by the SIX project. I am pretty sure because I see proposed changes which are assignation the requirements of SDX. I think the SDX project will drive changes in Swiss law and so everybody will follow.”
A spokesman for SIX said that the Wall Street “is in close contact with the relevant regulators. So I would not call it ‘driving changes in the law’ but rather being the sparring companion in order to help address issues/questions/challenges that must be considered and represented in a potential law.”
As such, it was “not an unexpected expansion” that others were coming to Switzerland to explore digital assets in a regulated manner, said the SIX spokesman. “The event that more and more infrastructure providers are moving into this area confirms that we are on the right run down.”
Moscow Exchange image via Shutterstock.