Tokenization Revolution: Reflecting on 2023’s Milestones and Paving the Way for 2024

Tokenization Revolution: Reflecting on 2023’s Milestones and Paving the Way for 2024

The year 2023 witnessed an unprecedented surge in the growth of tokenization, marking a transformative trend in capital markets. As we reflect on the remarkable milestones and major ‘firsts’ achieved over the last few months, it becomes evident that digital assets are reshaping traditional financial landscapes, from the way assets are created and traded to their impact on collateral mobility and market accessibility. R3 has been a huge advocate and supporter in the revolution and evolution of digital assets. We are proud to have played a part in many major firsts in the industry, shaping the future digital economy and building a stronger global financial system.

Real-World Impact

The tokenization of assets is no longer in the experimentation phase and is being harnessed by major commercial banks, central banks and financial market infrastructures (FMI). This comes down to the rapid pace our global financial system is changing, as well as the need to navigate ongoing economic and social uncertainties and challenges. Only those who innovate will be able to join the future digital economy. And only those who make it their mission to implement tokenization and digital asset initiatives now will remain at the forefront of success.

Many of 2023’s major tokenization innovations have been powered by R3’s leading distributed platform, Corda. In a ground-breaking move, HSBC took a giant leap by tokenizing the ownership of physical gold stored in its London vault, after it was revealed tokenized gold assets surpassed $1 billion in combined market capitalization in April. Similarly, Euroclear set a significant precedent by settling its first digital bond on the Digital Financial Market Infrastructure (D-FMI). Six Digital Exchange (SDX), a Corda-powered exchange has made many firsts this year. Back in January SDX issued the first native digital bond in the City of Lugano back in January 2023, and just in November announced its significant leap forward by collaborating on a ground-breaking pilot focused on tokenized central bank money for financial institutions. A few weeks later in December, SDX issued two digital bonds that can now be settled against a wholesale CBDC from the Swiss National Bank.

Over the coming months, these initiatives will drive new investment opportunities in existing and new asset types, while driving greater efficiencies, transparency, and security. These aren’t mere experiments; they are tangible examples showcasing the profound influence of tokenization on established financial infrastructures. Looking ahead to 2024, the trajectory of tokenization appears set to continue its upward climb. Projections suggest that a staggering $5 trillion in assets could be tokenized on distributed ledger technology (DLT) over the next five years. The Corda-powered examples above are already proof this projection is well underway to being achieved.

However, the realization of this potential hinges not only on the continuation of innovation but also on the establishment of robust frameworks and standards to facilitate widespread adoption.

A Need for Standards

While there is a growing understanding of the technical protocols required for unlocking the full potential of digital assets, industry standards remain in a state of ambiguity. 2023 witnessed important steps, but it is predicted next year will witness significant progression in further collaboration between governments, financial market infrastructures (FMIs), regulators, and technology providers to define and implement these standards.

Across Europe and the UK, regulatory authorities have been proactive in embracing the potential of tokenization and initiated important collaborative and legislative initiatives. Notably, the UK’s Financial Services and Markets Bill passed in June 2023 marked the start, and its Digital Securities Sandbox and the FCA Regulatory Sandbox further embed the country’s commitment to providing a controlled environment for testing and implementing innovative blockchain-based solutions. In a similar vein, the EU embarked on a journey to regulate digital assets with the introduction of the EU DLT Pilot Regime, and in June 2023 the Markets in Crypto-Assets Regulation established a comprehensive framework for the issuance and trading of digital assets within the EU.

Across the globe, the Gulf region continued to strengthen its position as a global hub for fintech in 2023, as more global enterprises tap into the region’s favourable regulations and large talent pool. For example, The UAE established its commitment by introducing comprehensive regulations governing digital assets and blockchain activities. In February 2023, the Dubai Virtual Asset Regulatory Authority (VARA) issued the Virtual Assets and Related Activities Regulations 2023. The following month, the Central Bank of UAE launched its CBDC Implementation Strategy, where R3 was selected as the tech provider.

Many Gulf nations are also setting up their own relative ‘Digital Asset Lab’ to enable and accelerate digital asset and financial services innovation. The Emirates NBD launched a Digital Asset Lab in May 2023, bringing R3 in as a core council member the following November to provide enterprise-distributed application capabilities and support. Similarly, Qatar announced the launch of its Digital Asset Lab, powered by Qatar Central Bank and partnered with R3, in October, to enable commercial banks and fintechs to collaborate and experiment with DLT.

The Road to a Tokenization Revolution

From central bank digital currencies (CBDCs) to tokenized deposits and regulated digital assets, the impact of tokenization on the future financial landscape is profound. While the transition won’t happen overnight, the journey has already begun and is poised to accelerate in 2024. The collaborative efforts of stakeholders across the globe will play a pivotal role in shaping the regulatory frameworks and industry standards that will define the next phase of the tokenization revolution. As we navigate the evolving landscape, the transformative power of tokenization promises to unlock new possibilities and efficiencies, ushering in a future where traditional financial paradigms are redefined. R3’s mission is to help financial institutions all over the world realize these possibilities and our Corda will continue to underpin major firsts as we continue the journey to enabling a more open, trusted and enduring digital economy.

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ESG1 Announces New Carbon Token Interoperability Between R3 Corda and Cardano Blockchains

ESG1 Announces New Carbon Token Interoperability Between R3 Corda and Cardano Blockchains

ESG1, the sustainability division of award winning energy blockchain company and R3 customer, GuildOne, announced the successful completion of the first full integration between R3’s Corda and the Cardano blockchain platform at the 2023 Cardano Summit during CEO James Graham’s Blockchain Sustainability: ESG Reporting and Supply Chains session.

ESG1’s advancement enables the seamless creation of transparent, public tokenized assets using data managed using long-time partner R3’s leading open, permissioned distributed tokenization platform, Corda. ESG1 will be utilizing this new interoperability in its portfolio of industrial and nature-based carbon credit projects and trading relationships.

Globally, the accelerating growth of blockchain solutions for carbon market infrastructure requires a new focus on interoperability across platforms, protocols, and digital asset standards. Predicted by Morgan Stanley to reach US $765 billion in voluntary carbon market value, tokenization can solve critical scaling and trust challenges by automating data management and verification while providing auditable, immutable credit provenance.

ESG1’s solutions were developed to support the maturation and digitalization of both compliance and voluntary carbon markets. “Our v10n (verification) and t10n (tokenization) components work in tandem; first verifying a claim by a project owner about carbon credit data using R3’s enterprise DLT platform, and then migrating Corda tokens out to Cardano’s decentralized public blockchain” said ESG1 CTO Barry Kreiser.

Interoperability between public and private blockchain technologies creates new opportunities for enterprises and government to access public token markets while maintaining privacy for business, financial, and identity information.

“We are excited to continue our deep history with R3 by leveraging the firm’s focus on interoperability in its release of the next generation of Corda, Kreiser continued “We are also extremely happy to further our support for Cardano and look forward to the upcoming Midnight permissioned sidechain release “

“Both permissioned and public blockchains are important digital infrastructure for the automated green economy,” said Alexis Pappas, GuildOne’s Chief of Innovation. “Corda allows us to securely integrate with IoT networks and compliantly manage sensitive data, while Cardano provides transparent token metadata that helps prove the integrity of climate progress and increases access to sustainable finance.”

ESG1 is deploying its smart contract powered solutions with partners including energy companies, clean technology developers, ecosystem regeneration non-profits, and carbon trading platforms, focusing on Canada and MENA as key markets.

CEO of ESG1 and GuildOne, James Graham, said that “Announcing the new interoperability at the Cardano Summit is a key step towards the realization of our ambitious mission – to ensure that digital carbon fulfills its promise. High quality, verified, data-rich and standardized tokens that exceed the requirements of key frameworks, protocols, and methodologies on the path to multiple – voluntary and compliance – carbon markets. Our Corda and Cardano hybridization is excellent proof that digital assets can move freely between platforms while maintaining trust and value.”

Richard Brown, Chief Technology Officer at R3, commented “The tokenization bridge between Corda and Cardano represents a major milestone in achieving greater DLT interoperability and we’re delighted to be working with ESG1 in driving innovation across carbon market infrastructure. We believe that the future digital economy will be built upon an interconnected ecosystem of multiple DLT platforms and enabling market participants to seamlessly move assets between them is fundamental towards reaching this long-term vision. R3 is committed to paving the way towards an open, trusted and enduring digital economy, and this use-case is yet another example of Corda’s ability to facilitate interoperability between different networks.”

Read about how Corda is driving a greener and more sustainable digital economy here.

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Unleashing the Power of Digital Assets with Tokenization

Unleashing the Power of Digital Assets with Tokenization

Tokenization is the process of representing real-world assets, illiquid assets, or data as unique digital tokens on distributed ledger technology and is gaining serious momentum in the financial world.

Those that realize the power of digital assets now will see benefits from access to new markets, further product innovation, collateral mobility, cost efficiencies and better liquidity management.

Consequently, this ground-breaking technology is sparking innovation and driving significant changes in how financial products are created, traded, and managed. From central bank digital currencies (CBDCs) to tokenized deposits and regulated digital assets, tokenization will drastically change the future financial landscape.

What are the barriers to tokenization?

Despite the many advantages of tokenization, distribution complexity and industry standards remain core challenges. Integrating tokenized assets into existing financial systems requires collaboration among various stakeholders, including regulators, institutions, and technology providers.

As with any new technology, there is always a battle between the regulatory context and the tech itself; regulators are always trying their best to keep up with the speed of technological innovation. Specifically, the banking industry faces regulatory hurdles when dealing with tokenized deposits and public chains. Basel rules place exposure limits on crypto assets, necessitating careful adherence to compliance guidelines. Ongoing fragmented private blockchain infrastructure also creates interoperability challenges across financial institutions.

There must be close collaboration between government and industry to develop a regulatory regime that can encourage innovation, the interoperability of solutions and the development of international standards that will regulate industry activity globally. Governments and industry leaders must act in partnership to ensure all relevant regional tokenization markets are a success.

Reaping the full the benefits of tokenization will require leading jurisdictions to be focus primarily on putting the necessary legal and regulatory frameworks in place to give industry participants the confidence to interact with tokenized securities.

Implementing The Correct Protocols

The financial world is rocketing towards one filled with digital assets. $5 trillion in assets could be tokenized on blockchains in the next five years. The potential is huge – if the correct tokenization solutions and frameworks are in place such as control location services, custody, and control frameworks, and most crucially, interoperability. This will all come down to the evolution of industry standards.

Ensuring known ownership and beneficial ownership is essential for building trust and mitigating risks in tokenized assets, and ensuring custody and control frameworks are crucial for the efficient and secure management of tokenized assets. Building standardized frameworks and market structures helps ensure the integrity of transactions and ownership.

One potential key market structure is the interoperability of previously siloed ledgers, which would enable wholesale institutions to use these technologies to tokenize previously illiquid assets. Considering this, blockchain or DLT interoperability has come to the forefront in recent years. As different distributed ledger technologies and regulated networks are used to solve various tokenization use cases, interoperability becomes vital in bringing all the pieces together. Interoperable systems facilitate seamless asset transfer and exchange across open distributed ledger technologies and platforms.

Although there is an understanding of what technical protocols must be in place to unlock the full potential of digital assets, ongoing vagueness surrounding industry standards will continue to remain a barrier. Whilst there is still a certain lack of principles to guide market participants interested in reaping the benefits of tokenization, private industry players can play a critical role in shaping these standards from the inside, by openly collaborating. For example, R3 and Adhara have launched the Hyperledger Lab, Harmonia. Harmonia will enable open conversation towards building industry standards around enterprise blockchain interoperability – and shape the future of financial instrument innovations, like tokenization.

The rise of tokenization was never intended to be dominated by a small number of market players, and now, thankfully, the industry is realizing that permissioned and permissionless protocols can and should work together. By tapping into diverse market and technological expertise, the industry can draw closer to empowering market participants to control their assets across different networks securely, seamlessly, and in a streamlined way.

Regulatory sandboxes, such as the EU’s DLT Pilot Regime, or the UK’s FMI Sandbox can act as exploratory frameworks that provide regulatory certainty and encourage experimentation. This will enable market participants to implement new technologies that support the tokenization of financial and digital assets, in turn helping shape future enduring and trusted industry standards.

By promoting the correct protocols and exploratory frameworks, as well as working on the development of secure interoperability, new digital markets can flourish, and market participants can innovate at scale.

Why do financial institutions need tokenization?

$5 trillion in assets could be tokenized on blockchains in the next five years, according to a June 2023 report from Bernstein.

If those thinking about unleashing the full potential of digital assets use the correct underlying distributed technologies and implement key tokenization frameworks, they will witness incredible benefits. These include being able to settle in real time, utilize global markets 24/7, implement programmable and immutable transactions, lower transaction and asset servicing costs, access new sources of liquidity and new asset classes, as well as better manage counterpart and credit risk.

As tokenization can enable fractional ownership, investors will be able to access assets previously considered out of reach. It democratizes investment opportunities and expands the market to a broader range of participants and broadens access to entirely new markets. With this, the industry can witness further product innovation. The tokenization of digital assets also streamlines the asset’s life cycle, reducing administrative costs and operational inefficiencies.

In recent months, key global bodies have increased the discussion surrounding the importance of collateral management. For example, the Eurosystem’s Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo) is working towards developing a Single Collateral Management Rulebook for Europe (SCoRE), which defines common rules for managing collateral, part of a mandate to foster European financial market integration and promote a truly domestic single market in Europe. By tokenizing assets, their mobility as collateral is enhanced. This has implications for borrowing, lending, and risk management in the financial ecosystem.

A digital future for finance

Tokenization is reshaping the financial industry and unlocking new possibilities,  helping to progress the development of central bank digital currencies (CBDCs) and other regulated digital currencies. It is transforming how assets are created, traded, and managed, in addition to democratizing access to financial markets, improve cost efficiency, and enhance collateral mobility.

However, addressing challenges such as distribution complexity and regulatory compliance is crucial for widespread adoption.

Open collaboration among various stakeholders across both public and private industries, including financial institutions, regulators, and technology providers, will be key to unlocking the full potential of digital assets and tokenization. By working together and adopting comprehensive frameworks, the finance industry can harness the benefits of tokenization and create a more inclusive and efficient financial ecosystem. Tokenization is not just a trend; it is a transformative force that will continue to shape the future of finance and drive innovation across industries.

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Gartner Recognizes R3 as Top Vendor in Tokenization, L1 Blockchain and Smart Contracts

Gartner Recognizes R3 as Top Vendor in Tokenization, L1 Blockchain and Smart Contracts

Blockchain innovation is emerging as a game-changer that promises a new era of digital transformation. Gartner’s 2023 ‘Blockchain and Web3 Hype Cycle’ has revealed that R3 is at forefront of this revolution, being recognized for its expertise in three critical categories: ‘Tokenization’, ‘Smart Contracts’, and ‘Layer 1 (L1) Blockchains’.

Gartner’s premise of the Hype Cycle is that all emerging tech goes through a cycle of ‘Market Hype’ down into ‘Trough of Disillusionment’ before reaching ‘Slope of Enlightenment’ and eventual ‘Mainstream Adoption’. If you want to dive into the details of how the Hype Cycles work, read all about it here.  

According to 2023’s Hype Cycle, ‘Tokenization’, ‘Smart Contracts and ‘L1 Blockchains’ have been deemed ‘transformational ‘in benefit rating.

We are now 2-5 years out from mainstream adoption of L1 blockchain platforms, and close to entering the ‘Slope of Enlightenment’, with market penetration at 5-20%. Smart contracts and tokenization appear a little further back in adoption, but the initial speculation and hype associated with the ‘peak of inflated expectations’ is over, the dust is starting to settle, and they are already on the way to the next phase: the slope of enlightenment.

The progress in blockchain technologies maturity indicates that it is no longer a mere hype but a valuable tool that can bring transformative changes to various industries, making it clear that the three categories R3 has featured in will play major parts in the impending modernization of institutions functioning in regulated markets.

Tokenization: Pioneering the Transformation

Imagine a world where physical and virtual assets are seamlessly transformed into digital entities. By enabling the digitalization of assets, tokenization expands the utility of blockchain beyond cryptocurrencies by demonstrating how it can securely represent and transfer real- world assets. This makes tokenization a revolutionary concept that allows enterprises to manage and interact with assets more efficiently.

Unlike traditional methods, blockchain-based tokens offer enhanced security, creating new opportunities for businesses to participate in innovative models. These tokens go beyond representation; they are programmable and fungible, paving the way for a digital landscape that’s more open, connected, and interoperable. From cryptocurrencies and decentralized finance (DeFi) to cleantech, local governments, gaming, and the metaverse, the applications of tokenization are boundless.

As enterprises explore new business models to navigate uncertainties, the trust, security, and programmability of blockchain-based tokens make them a preferred technology for the future. The compelling case of tokenization will inevitably help increase the mainstream adoption of blockchain and Web3 technologies.

Smart Contracts: The Foundation of Trust

Smart contracts, part of decentralized applications (dApps), are programmable agreements that automate various transactions and processes on the blockchain. They represent a transformational technology that empowers businesses to achieve efficiency, security, and transparency in their operations.

By eliminating intermediaries, smart contracts enable trust-minimized value exchanges and provide an immutable record of high-value data.

These contracts bring a new dimension to business relationships, enabling self-enforcing agreements across multiple partners. They offer a mechanism for organizations to collaborate while maintaining their autonomy. Whether it’s decentralized exchanges, peer-to-peer lending, NFT marketplaces, or even securing networks through staking, the potential of smart contracts is vast and diverse.

Layer 1 Blockchains: Building the Web3 Foundation

L1 blockchain platforms are now 2-5 years out from mainstream adoption, and close to entering the “Slope of Enlightenment”, with market penetration at 5-20% and Layer 2’s much further back in the Hype Cycle.

As the foundation of the Web3 ecosystem, L1 blockchains are decentralizing computing and changing the dynamics of trust. With features like transparency, immutability, and support for smart contracts, L1 blockchains are becoming the building blocks of a new digital world. They enable the creation of decentralized applications that redefine business models and governance structures.

L1 blockchains offer an open trust layer, providing a platform for smart contracts and Layer 2 chains. These platforms drive innovation across industries, from digital currencies and decentralized autonomous organizations (DAOs) to decentralized finance and the metaverse. As blockchain technologies continue to evolve and gain traction, they are becoming an integral part of the digital acceleration sweeping through industries and the public sector.

Embracing the Future with R3

R3 is pleased to be standing at the forefront of innovation, being recognized as a top vendor in tokenization, smart contracts, and L1 blockchains, which underscores our commitment to driving innovation and shaping the digital economy.

By harnessing the power of these technologies, enterprises can unlock new dimensions of efficiency, security, and collaboration, positioning themselves as pioneers in the Web3 era.

As we journey into a world driven by blockchain, it’s clear that tokenization, smart contracts, and L1 blockchains are poised to transform industries, redefine relationships, and open doors to unprecedented possibilities. With open collaboration amongst key industry players and experts, the future looks promising with the digital landscape set to evolve in ways we have just started to imagine.

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The Financial Services and Markets Act: a turning point for DLT in banking?

The Financial Services and Markets Act: a turning point for DLT in banking?

Distributed ledger technology (DLT) has emerged as one of the core technologies that banks are optimising to future-proof their operations. It is estimated that 43% of banks are engaged in either DLT proofs-of-concept or production implementation. The recent banking crisis has accelerated this journey. With balance and sheet management now at the top of the agenda, many banks are exploring how to harness technologies like DLT to manage intra-day risk more effectively.

The Financial Services and Markets Act (FSMA) represents a landmark in enabling banks to integrate DLT into their operations. It was passed into legislation in June 2023 as part of the Edinburgh reforms package. With the UK government now set to implement these proposals, understanding how the banking community can use DLT to optimise workflow and innovate in a risk-free manner is vital.

Notably, the act puts DLT at the heart of its mission to enable enduring financial services innovation. There are three ways it does this – by introducing a sandbox, enabling better regulation, and reshaping banking.

FMI sandbox: moving to next generation systems

The FMI sandbox is a key provision of the FSMA. It allows banks to explore DLT in a regulated framework by temporarily modifying certain legislation.

The sandbox has been widely dubbed the UK’s equivalent of the European Union’s DLT pilot regime. The Pilot Regime which went live in March 2023, also exempts firms from existing legislation. This is meant to promote the use of DLT and blockchain for the issuance and trading of tokenised stocks, bonds, and funds – including money market funds. Like the FMI sandbox, the objective is to assess whether to retain DLT-based market infrastructure on a permanent basis.

Banks can harness the sandbox and DLT as a means of digitising asset management processes and preparing for upcoming settlement updates. These include:

  • Real Time Gross Settlement (RTGS) Renewal Programme – The RTGS service is the infrastructure that holds accounts for banks and building societies and settles interbank payments. As of June 2024 the service is being updated to deliver wider interoperability, improved functionality and strengthened end-to-end risk management of the UK’s High Value Payment System. Innovation must be undertaken with caution, and banks can safely tap into the sandbox to test and implement the updates.
  • Tokenization – Tokenization has the potential to unlock faster settlement times and lower costs, and it is estimated that $5 trillion in assets could be tokenized on DLT over the next five years. Major banks such as JP Morgan have already affirmed their commitment to tokenization, with an initial focus on wholesale payments. With pressure on the UK government to introduce regulation for securities tokenization, we expect more banks will follow suit. Banks can use the sandbox to stay ahead of the curve by testing the tokenization of assets to make sure any innovations or proof-of-concepts are compliant with future regulatory frameworks.
  • Smart contracts – Smart contracts can signficaintly enhance the speed and efficiency of banking transactions. They go one step beyond blockchain’s utility of keeping an immutable record of financial transactions, to automatically implementing the terms of multiparty agreements. Currently, five global banks are building proofs-of-concept with a trade finance and supply chain platform that uses smart contracts. With this number likely to increase, it is important that banks fully understand the purpose they serve and how best to use them. The sandbox can act as a useful safety net in this journey, providing banks with the opportunity to implement smart contracts in a way that adheres to security and regulatory standards.

Innovation through regulation

Another aspect of the FSMA is that it further establishes smarter crypto asset regulation. Firms engaging in activities relating to stablecoins or crypto assets for payment will become subject to numerous regulatory requirements.

This includes Financial Conduct Authority (FCA) authorisation, capital requirements, rules for ensuring the quality and safekeeping of reserve assets, insolvency requirements, anti-money laundering requirements as well as more robust risk management and governance.

This sets out a similar path to the Europe’s recent Markets in Crypto Assets (MiCA) legislation passed in April, which also introduces more stringent risk management, capital reserve and disclosure requirements.

Regulatory measures will be critical in potentially bridging the gap between banking and crypto asset services. This gap is currently quite wide in the UK; concerns around volatility and fraud mean that almost half of major UK banks do not allow transfers and withdrawals from crypto exchanges.

The introduction of smart regulation will not only help embed greater consumer safeguards into crypto, but also serve as a platform on how the underlying technology is applied. Looking ahead, this will provide banks with more confidence to integrate crypto into their services, in turn making the UK a more attractive destination for more companies in this space to set up and invest in.

Reshaping banking

The banking ecosystem faces challenges across a range of fronts – everything from expensive and slow settlement to siloed legacy systems and rising operating costs. Permissioned distributed ledgers provide real-time verification of transactions – removing time and cost-consuming reconciliation – whilst also maintaining security and scalability. The FSMA represents a significant change to the UK’s financial regulatory framework, and a major step forward in enabling banks to realise the benefits of DLT-based systems. For banks, this is both an opportunity and necessity. The FSMA will not only help them adapt to future regulations, but also stay at the forefront of innovation as global competition rises

This content was also featured in AltFi and Banking Risk and Regulation.

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Working with R3 – a partner’s-eye view: #dltledgers

Working with R3 – a partner’s-eye view: #dltledgers

Atul Patel, Co-Founder and Head of Partnerships at #dltledgers, discusses the journey with R3 and its success to date with Noriko Sato, Senior Relationship Manager at R3.

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Project Tridecagon: R3 Participates as a Technology Partner

Project Tridecagon: R3 Participates as a Technology Partner

R3 is excited to have been a technology partner in Project Tridecagon, led by the Asian Development Bank (ADB). The project explored possible distributed ledger technology (DLT) solutions for the CSIF (Cross-Border Settlement Infrastructure Forum)’s CSD (central securities depositories)-RTGS (real-time gross settlement systems) Linkage model. This was enabled via the development of DLT-based CSD-RTGS Linkages prototype(s) and by testing cross-border, cross-currency DVP and PVP settlement under the DLT based systems.

Project Tridecagon was initiated to help support the discussion of the Asian Bond Markets Initiative (ABMI) supported by ASEAN+3―10 member states of the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China (PRC), Japan, and the Republic of Korea.

This innovative project exhibited how DLT can play an instrumental role in the post-trade arena by processing complex transactions to a range of pre-defined conditions and can observe such conditions even among different blockchain instances. In this Proof of Concept (PoC), connectivity was established between different blockchain networks, namely R3’s Corda, Consensys’ Permissioned Ethereum, Soramitsu’s Hyperledger Iroha and Fujitsu’s ConnectionChain to constitute a unified working ecosystem.

Fig: Conceptual Model of Project Tridecagon

Project Tridecagon Intended to Cover Two Scenarios

  1. Buyers overseas: that of a buyer domiciled in a market other than the domestic market and, hence, required to remit funds to an account or wallet in the domestic DVP environment to pay for the purchase of the bonds in the domestic market.
  2. Seller overseas: that of a seller being domiciled in a market other than the domestic markets and, hence, the requirement to remit to the seller the proceeds resulting from the sale of bonds the seller already owned in the domestic market to an overseas location (account or wallet or similar).

Both scenarios were intended to help represent the PVP leg of the intended cross-border DVP settlement, through the need to remit funds between overseas market and domestic market and convert the same from or to foreign currency, thereby linking 3 underlying assets or tokens.

R3 handled the atomic domestic Delivery vs Payment (DvP) side of the transaction using Corda. A Bi-directional integration was also established with Fujtsu’s ConnectionChain to ensure connectivity across all platforms.

Fig: Atomic Swap in Corda

Settlement regulations differ in each country, and participants in a cross-border settlement are subject to the different regulatory frameworks. A key challenge was how to simplify the cross-border Delivery v/s Payment flow while respecting differences across jurisdictions. The tokens in the PoC were a representation of a proxy-token that were created for the settlement purpose on-ledger. Tokens once issued in an economy will never cross the boundary of that economy. With accounts and custom logic ability, Corda was well-suited for this use-case.

Fig: Corda Network Participants

More details around the POC, conclusions and next steps were published today by ADB in a report on their website. View the report here.

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Greenium: Empowering Sustainable Investments on R3’s Corda

Greenium: Empowering Sustainable Investments on R3’s Corda

Greenium, an innovative platform built on R3’s Corda has been launched with the mission to revolutionize the way we both responsibly invest in, and finance sustainable assets.

Greenium’s new digital “leasing asset securitization platform” platform provides a scalable, flexible, and secure platform on which sustainable leasing assets are securitized and simultaneously made accessible for environmentally conscious investors. This lowers barriers to entry for participation in the sustainable finance world.

With a vision to drive positive change and create a sustainable future, Greenium opens new possibilities for green investments like never before. The global transition to a low-carbon economy is accelerating, and the demand for investment opportunities in sustainable assets has increased significantly – challenging traditional finance (TradFi) channels. Institutional investors who want to invest directly in sustainable physical assets often only find very complex solutions. These usually involve the acquisition of entire assets, high service costs and complex legal setups. 

Greenium is thrilled to announce that, Bikeleasing GmbH, one of the leading providers for corporate leasing bikes in Germany will be the first client on the Greenium platform. Bikeleasing, through its digital platform, delivers more than 150,000 leasing bikes annually to corporate clients throughout Germany and Austria. “The market for corporate leasing bikes is expected to surpass 2bn EUR in the next years, slowly but surely we are reaching the limits of traditional financing channels, the Greenium Platform is the ideal solution for us as it provides scalability, transparency and security in combination with futureproof DLT technology” states Paul Sinizin Co-CEO of Bikeleasing. Luc Olinger, CEO of Greenium adds “Bikeleasing GmbH is an incredible success story, I am proud that together we were able to design a groundbreaking solution to support Bikeleasing’s amazing growth for the years to come.”

Greenium is at the forefront of a revolutionary shift. The platform aims to connect investors with sustainable projects and businesses in need of financing, helping to accelerate this transition to more sustainable initiatives. Investors will have visibility into the growing pipeline of sustainable leasing assets on the platform and can digitally determine investment criteria and preferences.

Sustainable, Secure & Futureproof Collaboration

All of this is made possible by distributed ledger technology (DLT) and the digital, automated nature of Greenium’s platform solution – as DLT provides a scalable, transparent and secure solution for investing in and financing sustainable lease assets. Specifically, Greenium is based on R3’s Corda, the world’s leading distributed application platform, and is a business network on the independent Corda Network.

Greenium leverages Corda’s cutting-edge capabilities to bring transparency, efficiency, and trust to the world of sustainable investments. Corda’s unique features, such as its smart contract functionality enables seamless collaboration and streamlines complex financial processes. By harnessing Corda, Greenium ensures a secure and immutable record of transactions, eliminating the need for intermediaries and reducing the risk of fraud. The platform also ensures compliance with regulatory requirements, giving investors peace of mind when investing in sustainable projects. Once all investment criteria are determined, securitization takes place classically via a specially established Luxembourg securitization vehicle (SPV).

How it works

TradFi channels are no longer fit for scalability, as individual banks’ counterparty exposures are constrained, and leasing companies can rely on only a limited number of banks.

This means a more granular solution is required that would facilitate investment without the need for investors to actually acquire and service the assets themselves – one way to do this is via a lease structure. Strong demand necessitates significant upfront financing by the leasing company. With Greenium’s technology-enabled end-to-end financing solution, processes and workflows of both leasing companies and investors can be accelerated – with this Greenium enables participants to focus on scaling and growing their core business.

The Greenium solution facilitates the financing of lease objects contributed by leasing companies. It digitizes lease objects into Basis Tokens, which can be bundled into Greenium Tokens. Investors can then set criteria for Greenium Tokens, which receive ratings and are represented within a securitization fund. Lease payments are used to update Basis Token values, and recovered asset values are credited to corresponding Basis Tokens. Investors can then track Greenium Token performance, and once all Basis Tokens are redeemed, the Greenium Token dissolves, so remaining asset value is distributed to investors.

Driving the Future of Scalable, Secure and Flexible Investment Opportunities

Greenium presents a vast array of investment opportunities in the sustainable assets sector. From renewable energy projects and eco-friendly infrastructure to green bonds and impact funds, the platform connects investors with diverse options to support sustainable initiatives. Through Corda’s scalability, Greenium can accommodate a growing number of investors, ensuring that anyone, from individual investors to institutional players, can participate in the sustainable investment revolution.

Greenium’s users will also have full visibility into the investment process, tracking the journey of their funds and verifying the authenticity of the underlying assets. By fostering transparency, more trust is established among investors, ultimately driving greater adoption of sustainable investments.

In the future, it will also be possible to invest directly in a Digital Token (as electronic security according to German law eWPG) via Greenium instead of a classic securitization. Investors will always have real-time insight on investments, and therefore full transparency, analytics and reporting-on-demand are further features of the Greenium platform. This is set to revolutionize sustainable finance for decades to come.

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The Future is Interoperable: R3’s Update on Interoperability

The Future is Interoperable: R3’s Update on Interoperability

Richard G. Brown, CTO at R3, explains how R3 and other industry partners are building and shaping the future ‘regulated network of networks’, and why this is critical work in enabling a more open, trusted and enduring digital economy.

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Project Leonidas: R3 is delighted to be joining forces with ABI Lab, ABI and NTT Data Italia to Revolutionize Italy’s Financial Landscape

Project Leonidas: R3 is delighted to be joining forces with ABI Lab, ABI and NTT Data Italia to Revolutionize Italy’s Financial Landscape

Exploring a DLT-based Wholesale CBDC within the Spunta Network

R3, in collaboration with ABI Lab, ABI (Italian Banking Association), and NTT Data Italia, has been selected by the prestigious Bank of Italy and its Innovation Hub for the ground-breaking ‘Project Leonidas.’ This exceptional initiative aims to explore and develop wholesale Central Bank Digital Currency (CBDC) capabilities within the Spunta Banca DLT solution, a critical infrastructure of Italy’s financial ecosystem. Spunta Banca DLT is the only application based on Distributed Ledger Technology (DLT) in production on an entire national banking sector, with significant volumes; processing 94 nodes and over 600 million technical transactions in three years.

Milano Hub, the innovation centre created by The Bank of Italy to support the digital evolution of the financial market, called for proposals in 2022 to foster advancements in the application of technology based on distributed ledgers (DLT) to banking, financial, insurance and payment services.  The intensive evaluation process involved analyzing 57 submissions from 81 participants with the submitted projects being evaluated through three different sub-hubs: Fintech, Innovation and Research & Development. R3, in collaboration with ABI Lab, ABI and NTT Data Italia with the support of a group of banks emerged as part of the selected partners to be part of the Fintech Hub with the project.

ABI Lab, the Research and Innovation centre for Banks, together with ABI, the representative association of Italian banking groups, bring their vast experience and unwavering commitment to the project. As esteemed partners, ABI Lab’s and ABI’s involvement hold great significance, further solidifying the importance and potential impact of ‘Project Leonidas.’ Their deep understanding of the Italian banking industry, coupled with their dedication to fostering innovation and digital transformation, will undoubtedly contribute to the project’s success. Not to mention their experience in sponsoring and running one of the largest scale DLT production solution, Spunta Banca DLT, on Corda for more than three years.

R3 will bring its extensive expertise in distributed ledger technology as well as its global leading flagship distributed application platform, Corda, renowned for its security, scalability, and privacy features. Working in close collaboration with ABI Lab and ABI, R3 aims to leverage its collective knowledge and synergistic capabilities to create a robust, efficient, and future-ready CBDC solution.

In this transformative journey, R3 is also pleased to welcome NTT Data Italia as a key partner. Its expertise in technology integration will play a pivotal role in ensuring seamless collaboration between the CBDC ecosystem and the existing financial infrastructure. NTT Data Italia’s deep knowledge and proficiency will empower the team to develop a future-ready CBDC solution that aligns with the evolving needs of Italy’s financial sector.

As one of the fourteen esteemed projects chosen by the Bank of Italy, the Project Leonidas team of experts is eager to embark on a six-month development journey, commencing shortly  after the project selection announcement on May 17. Over the next 6 months, the team will dedicate its efforts to the exploration, design, and development of a wholesale CBDC solution tailored specifically for the Spunta Network. Upon the completion of the six-month development phase, R3 is optimistic that team Project Leonidas’ efforts will create a solution that not only showcases the immense potential of digital currencies to integrate in existing DLT solutions to enhance efficiency and transparency, but also reinforces Italy’s dedication to technological advancement in the financial domain and position as a global innovation hub.

Read more in the official press release here.

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From Deployment to Production: Your DLT Journey with R3’s Professional Services

From Deployment to Production: Your DLT Journey with R3’s Professional Services

Those that believe they know how to successfully leverage the full benefits of Corda – or any blockchain or DLT platform – based solely on  the solution or platform itself, should think again. It comes as no surprise the first step is about choosing the right blockchain system,  however those looking to truly maximize the business benefits from a DLT implementation, will also need access to world-class technical expertise and industry experience.

This is  where R3 prides itself – in the form of its expert  Professional Services team. The world’s leading software firms, government institutions and companies across many industries have already discovered

that working with our Professional Services team can dramatically accelerate their evaluation and deployment of enterprise-grade DLT networks and applications. Those that look at harnessing R3’s Professional Services today can do the same – with equally successful outcomes.

A comprehensive suite of services

R3 has always placed customer needs first, building our flagship platform Corda ‘bottom-up’ in response to the struggles banks were facing in 2014 upon R3’s inception for example. Similarly, following suit, the creation of our Professional Services team back in 2015 became a top priority as a means to deliver the very best  such outcomes to our customers. At R3, we know from first-hand experience that developing, deploying and maintaining distributed ledger systems can be hard. We therefore committed to making the end-to-end production journey as easy as possible. This meant setting up a hand-picked team of specialists to provide a comprehensive suite of advisory and engineering services for customers looking to implement CorDapps on the Corda platform.

In the years since, our Professional Services team has grown and evolved into what we believe is the leading repository of DLT expertise anywhere in the world, bar none. Today the team brings together more than 50 solution engineers, delivery professionals and industry subject matter experts, readily available to help everyone seeking innovative distributed platform solutions, and staying close every step of the way. The result? Being able to focus on what matters: deploying high-value blockchain applications to transform and optimize  operations and industry – enabling the realization of unique business visions.

Three key pillars…

In terms of clients, our Professional Services team works with customers ranging from financial institutions to ISVs, and from corporates to regulatory companies. But whoever we’re working with, our ultimate goal remains the same: to bring them business value as quickly as possible – by expediting their progress from deployment to go-live on Corda.

How do we deliver this? The answer is by focusing everything we do around three key pillars. First, design. We know that if we get the design right from the get-go, we can avoid problems down the line and any need for general refactoring. To achieve this, we have a great group of highly-skilled architects who go in and work closely with the customer, get a detailed understanding of the business requirements, and then translate that into technical design.

The second pillar is adopt. We always look to identify how best to help our customers adopt our software – and then ultimately their own end-customers can learn how to adopt it too. We do this by embedding some of our Corda developers into our customers’ teams, meaning we can help accelerate the CorDapp build effort and bring their solution to life as fast as possible.

The third and final pillar is grow. This is the critical phase where the rubber really hits the road, and it centres around how we can make the go-live as successful as possible. Once that has been achieved and we have guided the customer into production, our role evolves to helping them to grow their network, optimise their Corda blueprints, and make sure they’re set up for success going forward.

…and three non-functional priorities

As well as focusing on the three pillars to guide the customer along the journey, our Professional Services team also keeps a close watch on three non-functional priorities. The first – not surprisingly – is security and privacy. Our architects do everything possible to design the best and most secure enterprise systems, thus ensuring our solutions are robust and futureproof for customers.

The second priority is disaster recovery and high availability. We know it’s mission-critical to have the Corda systems and applications running at all times, and able to support business-as-usual for customers in any eventuality.

The first two non-functional priorities tie into the third: production readiness. Our team’s unwavering aim throughout every engagement is to implement Corda in the way that best suits the customer’s business needs – so they feel confident that they’re ready to go into production and continue their journey successfully into the future.

Your success is our success

Through this consistent approach, our Professional Services team has built up a proven track record in helping clients maximize the success of their blockchain solutions and minimize the time to value.

For example, customers have benefitted from our QuickStart Service for fast discovery, platform evaluation and solution design; brought in R3 engineers to augment existing teams; and leveraged the R3 ecosystem to execute multi-institution, global go-to-market trials to promote and test applications.  Additionally, when it comes to delivery, you can rely on R3’s best practices to de-risk production deployment, accelerate go-live, enable smooth upgrades and tap into enterprise software support.

The message? Our Professional Services team is the living embodiment of our mantra that your success is our success – and shows we’ll always go the extra mile in bringing it about. So, whether you’re at the initial design phase for your business’s DLT-enabled future or moving into production, take a look at how R3 Professional Services can help accelerate your journey. We think you’ll be glad you did.

Get in touch today.

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Mentor Success Story: John Ho

Mentor Success Story: John Ho

John Ho, top regulated industry expert and R3 Mentor, discusses his motivations to join R3’s mentor program, and what it entails. John also reveals why it is critical to enable enterprise and start-up partnerships.

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