The head of securities trading at SIX, Switzerland's largest stock exchange, said the exchange could issue a token to achieve the goal of digitizing traditional assets.
In an interview, Thomas Zeeb revealed that SIX's upcoming digital exchange will launch a native asset and "Initial Digital Offering" (IDO) service by 2020. Prior to this, it is expected that the test will be completed this summer.
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In addition, Zeeb believes that token assets will eventually replace stocks and bonds.
The following is the full text of the interview:
How is your digital exchange established in Switzerland going?
Thomas Zeeb: We will start the pilot project this summer, and the first service will be put into use in early 2020. We will start with native digital applications – launching new token assets and IDO services.
What type of token assets?
Thomas Zeeb: There are many organizations that want to introduce tokenized structured products, real estate funds, and more. But it could also be our own IDO. Whether you want to start with warrants, structured products and funds depends on our customers. We are currently finalizing the final plan with our customers.
As a distributor of token assets, what problems need to be solved?
Thomas Zeeb: IDO needs to meet similar standards as IPOs. You can't just write a white paper like ICO, just exaggerate it, and then you can publish it. As an infrastructure, we want to ensure that we set standards and maintain existing asset security and investor protection rules.
What is the goal of creating such an asset after solving all the problems?
Thomas Zeeb: In the end, we want to be able to tokenize existing securities – stocks, fixed income, funds. Maybe one day such assets will eventually replace stocks. We need to issue token assets by freezing and segregating securities. Then, as needed, delete the assets in turn and release the corresponding securities again.
When can you achieve this goal?
Thomas Zeeb: We expect to be 2021. The prerequisite is to have an appropriate regulatory environment – it will be crucial if we can do that by then. Early next year, as the regulatory dialogue progresses, we will test the first phase and we are preparing for the second phase. It will be the time when the miracle really begins.
Are your bank users active in this process?
Thomas Zeeb: There is a huge difference between them. Some banks do not have the habit of being a pioneer, but are willing to wait and see, while others want to be at the forefront and participate in the upcoming changes. In order to keep up with the pace of development, some companies have allowed as many as 20 people to join us and work with our employees.
SDX (SIX's Digital Asset Exchange) does not have a plan to trade cryptocurrencies. What is the reason?
Thomas Zeeb: The fatal flaw in cryptocurrency trading is that you don't know who the traders behind the scenes are, and the source of these coins—the design is like this. Like the traditional world, we have a responsibility to ensure that anti-money laundering and transaction monitoring processes are properly carried out. According to the current status and trading methods of Bitcoin, it does not meet the SDX standard.
But some wealthy customers have shown a strong interest in the cryptocurrency industry.
Thomas Zeeb: There are always investors who like high-risk assets. Certain products are also marketed outside the stock exchange platform.
Will SDX consider accessing cryptocurrency exchanges?
Thomas Zeeb: There are various initiatives around the world that aim to create a legal pool of funds for cryptocurrencies. For example, we have discussed how to interoperate between different chains and ensure that you have access to the pool of funds. If today's cryptocurrency market can be legalized in terms of "know your customers" (KYC) and "know-your-coin", we are likely to establish the necessary connections between their respective infrastructures. .
How much does it cost to create SDX?
Thomas Zeeb: We have invested millions in this year and last year. The final price depends on many factors, including regulatory requirements, new customer use cases, how long we need to maintain SDX readiness, and when to start making money.
In other words, you have to maintain two sets of trading systems – the cost is also double, how long will this situation last?
Thomas Zeeb: It will take another five to seven years for SDX to get enough trading volume to ensure a conversation about shutting down traditional infrastructure. Banks and other counterparties must adapt their traditional systems to the digital world, and each company will do so in its own investment cycle.
Is this process (transformation of traditional systems) not the problem facing your customers?
Thomas Zeeb: The transition to digital infrastructure, as we have imagined, will not replicate old processes with new technologies, but will change processes on a large scale, reduce risk, and increase liquidity for customers. This in turn creates a business case for our customers. Our approach can help our customers adjust their systems to move to the digital platform.
SDX currently has 70 people. What will happen at the end of this year?
Thomas Zeeb: There will be about 100 people, and we are going to start operations next year.
What preparations does the bank need to prepare for the upcoming SDX?
Thomas Zeeb: As an infrastructure platform, we have our own responsibilities, but we will pass on the message “Start from this summer, start using it, start thinking about what it means for your business, and think through some transactions. "Innovation will begin to flow, and our members and other market participants will create some wonderful products." This is where the opportunity lies and where it is fun.