Archax, a digital assets company, is set to launch prototypes of digital versions of FTSE100 shares and UK government bonds on the blockchain. This development will enable investors to trade these assets in the near future. The pilot of the London-based company, which has received funding from the asset management giant Abrdn, is scheduled to commence on June 7th across a few public blockchain networks, such as Ethereum, Polygon, and Algorand.
Archax will commence by acquiring shares of an undisclosed FTSE100 stock and UK government bonds, commonly known as gilts. The custody platform will be utilized to store the underlying assets, which will subsequently be tokenized to represent the asset’s interest. As per the statement of CEO Graham Rodford, clients will have the ability to trade tokens that signify ownership of tangible assets by the fourth quarter of 2023.
The digital assets industry is making a concerted effort to integrate distributed ledger technology with established products like equities and bonds, as part of a broader initiative. According to banking industry leaders like Goldman Sachs and State Street, tokenization is expected to result in significant cost savings by streamlining trade settlement processes and minimizing administrative overheads.
The UK government has recently completed a consultation on the future regulation of the blockchain and cryptocurrency industry. It has been indicated that the government will be monitoring the institutional aspect of these technologies in a manner similar to financial services. Rodford informed Financial News that after devoting five years to constructing their regulated infrastructure in the UK, they are now capable of producing digital renditions of conventional products. This, they believe, will serve as a stepping stone towards the forthcoming digital era. In recent times, there has been a gradual clarification of regulations and laws, which has resulted in increased liberty to explore such initiatives.
Following the decline of FTX, numerous financial institutions have sought to distance themselves from prominent cryptocurrencies like bitcoin and ether, leading to the rise in popularity of tokenisation as a means of experimenting with blockchain technology. Goldman Sachs, Moody’s, Deloitte, and other firms declared in May their participation in the launch of the Canton Network. This novel blockchain network aims to enable the integration of previously isolated blockchain systems onto a single server, while still preserving the privacy controls mandated by major financial services players.
Meanwhile, digital assets entrepreneurs have received support from companies like Nomura and Standard Chartered to avoid lagging behind competitors who are creating blockchain-based products.
In the previous year, Abrdn declared its acquisition of a share in Archax, thereby becoming the principal external stakeholder of the company. Archax has recently introduced a custody solution for digital assets, including cryptocurrencies.