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CEO of ODX, Japan’s secondary security token market, says a public blockchain is needed – Ledger Insights
Last Christmas, Japan’s Osaka Digital Exchange (ODX) launched its START secondary market for security tokens. During a recent Tokenomy Korea event, ODX CEO Kimio Mikazuki discussed Japan’s current use of private consortium blockchains for issuing security tokens and its desire to use public blockchains.
ODX was founded by SBI and is backed by Cboe, SMBC, Nomura, Daiwa Securities, Optiver and Virtu Financial.
“For the token security ecosystem to be healthy, the public chain must be used together” with private blockchains, Mikazuki said according to the Korean agency Financial news.
Currently, the Japanese security token issuance market is dominated by the MUFG Foundation Progmatand Ibet for Fin founded by Nomura-controlled BOOSTRATION. Both platforms have multiple external shareholders. Progmat’s core issuing solution uses R3’s Corda enterprise blockchain, while BOOSTRY uses an enterprise version of Ethereum.
Mikazuki explained that the reason for exclusively using enterprise blockchain is that the Japan Financial Services Agency is concerned about anti-money laundering (AML) and theft on public blockchains.
Concerns about public blockchain
Public blockchains promise a more open and global infrastructure for tokens. Japan certainly has global ambitions in the tokenization sector. However, it may be complicated for foreigners to invest in Japanese security tokens without the prospect of some foreign institutions integrating with local blockchains.
Last week during a US Congressional hearing, it has become clear that some do not fully understand that there can be safeguards against theft and money laundering on a public blockchain via the security token smart contract. The main aspect that cannot be controlled is the underlying blockchain infrastructure. However, if there is sufficient permission and control at the token level, tokens could be moved to another blockchain in an emergency.
“Until now, Japanese regulators have been reluctant to allow public blockchains to engage directly in tokenized securities, so they are moving towards private consortium blockchains,” Mikazuki said. He added: “I fear we may become isolated” if public blockchains continue to be restricted in Japan.
That said, numerous Japanese stablecoin initiatives use public blockchains. MUFG’s Progmat has a Progmat. Coin initiative interoperable with multiple public blockchains, but has not yet launched.