The global tokenised treasury market exceeded a value of $680m in August 2023. Now, DigiFT, a decentralised exchange for digital assets, has launched the first fully regulatory-compliant US treasury token issued on a public blockchain: the DigiFT US Treasury Token (Dust).
Unlike other tokenised treasuries, Dust provides a regulated, on-chain channel for investors to invest in US treasuries with a specific maturity date of December 31, 2023. DigiFT founder and CEO Henry Zhang says Dust will broaden pathways for investors to explore tokenised real-world assets (RWAs) on-chain with full transparency, backed by institutional-grade risk management mechanisms.
This follows the ongoing progression of financial assets ownership, which has undergone three major phases: phase one being paper-based, phase two electronically-based and phase three token-based. Increasingly, buying and trading in financial assets will be centred around token ownership, reflected by the US treasury, which Mr Zhang says is increasingly taking on token form.
Trust and transparency at the core
Offering investors more choice, DigiFT aims to bridge the gap between traditional finance and decentralised digital finance. Investors can use either the fiat US dollar or stablecoins – in the form of US dollar coins (USDCs) – to invest in the new regulatory-compliant security token.
Once the token matures, investors can choose to receive the principal value plus interest in either the US dollar or USDC. With a minimum investment amount of one US dollar or USDC, investors also benefit from a lower capital outlay.
Mr Zhang says the tokenisation of RWAs is poised to become the future of investing, with Dust able to support the wider adoption of digital tokens. “Given our unique position as a regulatory-compliant [decentralised exchange], we are not only excited about the opportunities to bring more RWAs on-chain, but also to innovate and introduce new, compliant solutions for investors,” he adds.
When the ownership is in token form, its record is maintained on a blockchain. Traditional electronic forms of record-keeping, which are centralised, are often kept at banks and the stock exchange. DigiFT, on the other hand, is decentralised on public blockchain, using Ethereum for record-keeping.
Its open architecture means all records on Ethereum are immutable and technically accessible to all; investors can see details about their tokens, and once the information is there, the record cannot be manipulated, a key advantage over current forms of ownership.
What the financial industry needs is trust, says Mr Zhang. “This trust is based on data and that data needs to be transparent, it needs to be complete, and it needs to be accurate. The data on blockchain is very transparent, and the blockchain is complete and immutable. Whether you are as powerful as a central bank or just an individual, you have access to the same data.”
Ensuring trust is partly why combining the governance of traditional finance together with new technology is optimal, Mr Zhang adds, referring to the use of good practices such as know-your-customer, combating the financing of terrorism, and investor protection mechanisms.
“We should use these best practices no matter which technology we use. If we combine the best parts of the technology and make full use of existing regulatory infrastructure in the financial industry, as well as its best practices, the impact will be very positive: information is very secure, accessibility is improved, the settlement can be quicker and the settlement risk is minimised,” Mr Zhang explains.
Blockchain may also be a transformative technology for banks to improve services and customer experience, but the way banks operate must evolve effectively, Mr Zhang says. “Banks will still be here. You go to the bank to fulfil payment services, for lending options, or to explore capital markets, but the way banks’ functions are performed will change.”
Digital transformation
Mr Zhang compares the effects of blockchain technology on financial infrastructure to the impact of the internet, describing blockchain as a key enabler of digital transformation. In this way, blockchain offers important infrastructure where finance and technology continue to bond, as the scope for blockchain’s potential uses and applications builds. As it evolves, Mr Zhang acknowledges that speed is a critical area for improvement.
“The internet decades ago demonstrated potential, but it was very slow and expensive. Then, we saw the development of 2G, 3G, 4G, and 5G. Now it’s very fast. With blockchain, we will see the same thing. Currently, the blockchain is equivalent to the internet’s “G” or “1.5 G” stage: it’s not very fast,” he says.
More on tokenisation
As infrastructure improvements address blockchain’s speed and cost aspects, Mr Zhang anticipates that regulation will also develop, describing the evolution of legislation and regulation as critical to accommodate new forms of financial asset ownership. Money continues to evolve alongside this, he adds, predicting that the amount of money in token form will only grow.
“Whether it’s central bank digital currency, a stablecoin like USDC, or something even more crypto-native like tartarus [a decentralised fundraising platform], money is increasingly in the form of tokens,” he says. “We continue to follow our mission to bring the best of traditional finance and the future digital finance together.”
