Private companies and SMEs account for a significant portion of global employment and GDP. For example in Singapore, they account for over 69% of employment and 49% of GDP. Despite this, SMEs often face significant financing and liquidity challenges, which in turn inhibits growth. Current exit strategies are limited to options such as IPOs, which carry high costs and have hefty eligibility requirements, making it impossible for many to participate.

With the aim of providing an alternate exit option for these SMEs — CapBridge, backed by the Singapore Exchange, in partnership with ConsenSys — developed 1xchange (1x). This is Singapore’s first regulated private securities exchange with the goal being to provide a platform for private companies to raise capital and to increase liquidity in the primary capital market by using a public blockchain to validate transactions.

“The overall idea is to bring liquidity to an otherwise historically illiquid assets. We are starting off with private companies. In the future, we intend to apply the same workflow to other illiquid assets like bonds or real estate, etc.” 1X chief executive Haiping Choo told Coindesk.

Private companies can list up to 30 percent of their shares in the form of tradeable private equities on 1X, establishing a new and regulated asset class for Singapore accredited investors.

Built on the public Ethereum mainnet, this endeavor has the potential to enable the private exchange to tap into a global liquidity pool. Overall, the platform provides the ability for SMEs to gain easier access to capital, as well as providing investors with greater liquidity and returns on their holdings.

Unlisted Infrastructure Assets — Allinfra

Unlisted assets are investments that are not listed on the stock exchange. These can include property (large office buildings and shopping centres), infrastructure (roads, power grids and airports) and private equity (investments in start-up or existing private companies). Unlisted infrastructure assets are highly sought after. They are typically characterised by having long operational lives with revenue grown strongly linked to inflation and the barrier to invest in them is high. Historically, these assets have only been available to the large institutional investors.

Through an Ethereum blockchain solution, AllInfra built a platform that allows for the creation, purchase and transfer of economic or ownership interests in these assets. On top of that, these were done in a compliant, transparent and efficient manner. Thus, making financial and commercial benefits of unlisted infrastructure assets accessible to a broad spectrum of investors.

This is not only beneficial to investors but also for existing asset owners and investors with the platform providing them access to a broader funding base that was previously unavailable. The platform is open to a large number of segments including energy production, distribution, storage, transportation, telecommunications, water and waste treatment, education and health.

Bonds — Commonwealth Bank of Australia (CBA)

In January 2017, Australia’s largest bank, CBA used its capital markets blockchain platform to issue a cryptobond for the Queensland Treasury Corporation (QTC), making it the first government entity in the world to do so.

Using the blockchain platform, QTC could view investor bids in real time, finalise investment allocation and settle instantly with investors. The bond was created in digital form using smart contract technology, and has the ability to automatically pay coupons to the current holder when due.

CBA then went on to launch another world first. In August 2018, CBA helped its client, the World Bank, launched the world’s first bond created, allocated, transferred and managed through its life cycle using distributed ledger technology. Following a two-week consultation period with the market, the two-year bond raised A$110 million.

8 months later, the World Bank and CBA enabled secondary market trading recorded on blockchain, making this the first bond whose issuance and trading are recorded using distributed ledger technologies. The successful completion of a secondary transaction with trading activity recorded on a distributed ledger illustrates the vast potential to enhance the coordination of securities trading and management on blockchain — delivering a verified, permanent record and instant reconciliation.

“Enabling secondary trading recorded on the blockchain is a tremendous step forward towards enabling capital markets to leverage distributed ledger technologies for faster, more efficient, and more secure transactions,” said World Bank Vice President and Treasurer Jingdong Hua.

In Conclusion

The rising tide of asset tokenisation via blockchain really does not stop at just financial services. For example “Vevara In Your Dream” is the world’s first tokenised anime film. The film’s token sale went live in July 2019 on BlockPunk’s platform and when the tokens are sold out, they will be tradeable on the BlockPunk platform, with 85% of each sale going to the film’s director.

“Effectively, creators can easily protect their rights by recording on blockchain and monetize their content by selling limited edition digital copies and even earn when fans trade items peer-to-peer”, said Julian Lai-Hung, BlockPunk’s CEO & CoFounder.

Another example is in the $135 billion video gaming business. The Nitro platform lets users participate in the refinement process by voting on their favorite games, reviewing their quality, and ranking their progress.. Using the platforms native NOX token, users financially support and have a say in which gaming idea gets published. Nitro partners with iCandy, a leading game developer in Southwest Asia to bring compelling ideas to market.

These examples are just the tip of the iceberg when it comes to the possibilities that tokenisation can bring to investors and companies seeking to secure funding. As more investors and companies begin to understand the benefits of asset tokenisation, more assets will be unlocked leading to greater freedom in the trading markets. In time, these processes will be more efficient which will in turn create even more value.

Tokenisation is not just a one-off phenomenon either.Government regulators like the Australian Tax Office (ATO) are looking into how it works as it gains popularity. Recently, the ATO has begun seeking industry comments as it progressed its review and consultation of the Australian regulatory and tax landscape surrounding token raises. For more on tokenisation, you can read ConsenSys Partner, Ajit Tripathi’s exploration into tokens and liquidity and learn about how enterprises can benefit from tokenisation.