Securities Commission Malaysia Completes Blockchain Pilot Project
Problem: Is blockchain technology feasible for employing as an underlying market infrastructure for unlisted and over-the-counter (OTC) markets?
Solution: A vision to create a ‘multi-tiered market environment’ which contains both centralized and decentralized markets, with the latter underpinned by distributed ledger technology (DLT).
Strategy: Simulate an equity crowdfunding environment and utilize Ethereum-basic tokens to represent equity and money, and use smart contracts to codify rules of offerings and distribute the appropriate tokens and assets.
Initiative Highlighted: Project Castor
What is it?
Project Castor aims to demonstrate that a distributed ledger technology (DLT) can be a viable infrastructure for unlisted and over-the-counter (OTC) markets.
What problem does it solve?
Project Castor demonstrates that issues in the OTC space can be solved through blockchain. Key issues include information asymmetry, transparency issues, inefficiencies in regulatory reporting, and complexity of OTC instruments.
How does it solve it?
Project Castor solves these problems by allowing participants to engage directly without intermediaries, viewing the transaction history of instruments leading to better price discovery and matching, reducing regulatory burden, executing complex OTC transactions based on pre-defined criteria.
It simulated an equity crowdfunding environment and utilized Ethereum-based tokens to represent equity and monies. It also used smart contracts to codify the rules of offerings and distribute the appropriate tokens and assets automatically once offerings were closed.
The chairman of Securities Commission Malaysia announced the successful pilot project at the annual Synergistic Collaborations by SC (SCxSC) conference in Kuala Lumpur and unveiled the release of a report detailing the initiative titled ‘Capital Market Architecture Blueprint in a Decentralized World.’
What they found most exciting is that Project Castor has the potential to not only help the equity crowdfunding ecosystem, but more importantly, it can now help to improve capital markets at large. They designed it in way that it was modular enough to be applied to different financial products and services.
Source: Open Gov Asia. Full article can be found here.