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Goooood Morning, Rainmakers! ☀️

As always, we have two captivating topics for you to dive into:

1️⃣ 🇨🇭 SDX Welcomes New Bank to CSD: Hypothekarbank Lenzburg

2️⃣ 📦 Tokenized Shipping: Shipfinex and TMC Shipping

Without further ado, it's time to…

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🇨🇭 SDX Welcomes New Bank to CSD: Hypothekarbank Lenzburg

SIX did it again - a new bank is onboarding to their central securities depository (CSD): Hypothekarbank Lenzburg!

As covered in previous editions and on STM.Co, SIX Digital Exchange (SDX) is fully regulated financial market infrastructure for digital assets in Switzerland which offers issuance, trading, settling, and custody all in one platform. The interesting thing though is that they also have analog/not-on-chain versions of these securities so as to not scare off traditional participants.

So why join the SDX CSD?

Well this starts diving into the difference between digitally-enhanced vs. digitally-native securities. The latter are, for example, share classes only available on-chain. Institutions are increasingly adopting this technology and in jurisdictions with web3-friendly regulation (like Switzerland) it makes sense to take full advantage of blockchain’s benefits, hence why Hypothekarbank Lenzburg may be interested in offering them to their clients.

In the US, licenses for BD/ATS can be very specific as to allow or not allow digitally-native securities. Bosonic is an example of one with the ability to work with both while supporting trading across custodians. In terms of issuances, one of Figure’s AAA rated securitizations was natively originated on Provenance Blockchain. This was a $237M HELOC underwritten by Jefferies, Goldman Sachs, and JP Morgan.

Joining SDX as a member of their CSD allow them to leverage the technology with someone already compliant in this arena. Hypothekarbank Lenzburg is the 6th bank to come onboard, joining UBS, Berner Kantonalbank, and Kaiser Partner Privatbank among others.

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📦 Tokenized Shipping: Shipfinex and TMC Shipping

We’ve seen so many interesting things get tokenized and this week we have another one: shipping!

As one could imagine, these ships can be pretty expensive and owners/companies providing these services may seek alternative financing options to grow their fleet. Well, now there’s this option: tokenize it. These aren’t yachts by the way (as much as I’d like them to be 😉), these are huge vessels for transporting goods.

Shipfinex allows owners to raise capital from individuals in exchange for fractional owner(ship). See what I did there? 😂 They just announced their first tokenization client TMC Shipping, a global ship owner out of the UAE and Greece.

Why tokenize? Can’t you raise capital for fractional ownership without going on-chain?

Absolutely and that’s a good point, not everything needs to be tokenized. In the case of shipping here are some points that may help the tokenization argument.

As mentioned, a likely cause of raising capital is to simply grow the company’s fleet and stay competitive. What happens if a large amount of investors are demanding to get out of their investment?

• Investors and/or the issuer have to find others willing to buy their shares. Even if they do, that’s paperwork, time, and money.

  • Tokenization streamlines this process a bit by having these security tokens trade on a regulated exchange.

• If no replacement investors are found, the issuer may feel pressure to sell the vessel to get investors’ money back

  • This defeats the purpose - the company wanted to grow, not shrink, their fleet

  • Even if they were willing to do it, the vessel may sell at a discount which is a loss for both the issuer and the equity holders

This is an interesting tokenization use case and I’m looking forward to seeing how the offering does. Of course, once it starts trading we’ll be tracking it on STM.Co!

💦 What else is Drippin’

State of Security Tokens 2023 - Q2 Report

NEW: The Security Token Advisors State of Security Tokens 2023 - Q2 report is brought to you by Coinbase!

Our Head of Research and Institutional, Peter Gaffney, dives deep with updates from across the industry, from issuers to platforms to protocols.

This edition covers:

• Key institutional tokenization initiatives

• Digital tailwinds in Private Equity, Private Credit, and Commercial Real Estate

• Secondary Trading Activity

• M&A and Investments

• 40+ Service Provider Updates

• Public and Private Blockchain Developments

Take a read for analysis on common themes emerging for both primary and secondary markets!

This is not financial or investment advice.

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Everything in this newsletter is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this newsletter should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.