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Thought Leadership Program
Digital Asset Platform Initiative
Why?
• Future of assets
• Future of markets
• Future of money
• Disruption
• Innovation
Platform Digital Efficiency
2 – SET Digital Asset Platform Page 2
Platform for Collaboration
Governance&
Compliance
SET
Current Future
Digital Asset Custody
Payment
Exchange
Settlement
Member
Member
Member
White List&
Black List
Customer&
Account
AssetTokenization
DigitalAssetFiling
UnderlyingAsset
Custody
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
2 – SET Digital Asset Platform Page 3
Our Vision for the Future
Digital Asset Platform
SharingEconomy
CircularEconomy
High ValueCreation
Sustainability
2 – SET Digital Asset Platform Page 4
Programme Schedule
2 – SET Digital Asset Platform Page 5
3rd October 2019
Agenda
1 – Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
Broadening Access and Scope to Reach More People
Donation
Banking
Investment
Full KYC
+ Name+ Citizen ID
Full KYC + Suitability Test
Medicine
Food & Transport
+ Tel Number+ E-mail
Reach
Scope
Low
Expand
Products & Services Payment & SettlementInvestment Savings
High barrier to entry
+ Address+ ID Card
2 – SET Digital Asset Platform Page 7
Business Use Cases: Start Small and Expand
….
…
Group Settlement &Custody in CLMV
…
Domestic International
B to B
… to limited C
Internal R&D
Funding
Corporate Donation
Internal Settlement
R&D Fund Raising
Staff Donation
Internal
Mass R&D Fund
Raising
Public Donation
…… to wider C
Global R&D
Fundraising
Foreign Securities
Global Donation
Global ESG Products
2 – SET Digital Asset Platform Page 8
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
What is the current state of DLT?
2005
100 %
0 %2015 2025 2035
Smartphones Distributed LedgerTechnology
Today
3 – Introduction to DLT Page 11
Traditional payment process between two parties
AlexSophie
BankBankCorrespondent
bankCorrespondent
bank
A payment requires multiple stages: this is time-consuming and can induce errors
Ledger Ledger Ledger Ledger
Page 123 – Introduction to DLT
The core of Distributed Ledger Technology
AlexSophie
The core of DLT is that all transactions of a specific asset
are recorded in one shared distributed database
Ledger
Page 133 – Introduction to DLT
Different types of DLT networks
• Bitcoin (9,000 nodes), Ethereum (16,000 nodes)
• Everybody can set up a node; unrestricted
• Geographically dispersed
• No legal body, no access by government
• Large network, lower throughput
• Consortium of banks (e.g. 50 nodes)
• Only selected parties can participate
• Nodes are participants and have a legal entity
• Legal entity that is liable and can be contacted
• Slim network, higher throughput
Public Blockchain1 Enterprise Blockchain1
e.g. 50 nodes
9000 nodes
Page 143 – Introduction to DLT
1Note: The term Blockchain is used here synonymously with DLT
A simple smart contract to transfer any type of asset
These functionstransfer money
or any asset
Page 153 – Introduction to DLT
Capitalized register(i.e. registry organizing ownership of money or assets)
The most important aspects of DLT
Record keeping technology
1
2
Programmable money, tokenized assets
3
Page 163 – Introduction to DLT
How does a transaction currently works? (2-3 days)
How does a transaction work on a DLT system? (within seconds)
DLT provides an infrastructure for transactions
A BClearinghouse
A B
IT system 1
IT system 2
DLT system
Shares
Approval
Money
1 2
3
4 5 Shares
Money
Page 173 – Introduction to DLT
Atomic Swap
1Shares
Money
Smart contract
How does current system work for money transferrals?
Online brokerage
Portfolio account number
Password
Transferred stock
Wallet
Public key
Private key
Transferred tokensStocks
Baht, EuroUS dollarSecuritiesVouchers
Car access
Traditional system for one purpose
DLT system for multiple purposes
Page 183 – Introduction to DLT
Where have tokens been used and where will they be used?
Investment token;security token
Stable coin(digital Euro)
Software license Utility token
(Nothing)
3 – Introduction to DLT Page 19
cryptocurrency,cryptoasset
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
4 – Business Applications of DLT Page 21
Digital share registry and transfer of shares today
Class BSHARES SHARE PRICE HOLDING
200 1 USD 16 %
Class ASHARES SHARE PRICE HOLDING
500 3 USD 5 %Class ASHARES SHARE PRICE HOLDING
400 3 USD 4 %
ABC Ltd.
Holding
600 Shares / 1‘400 USD
Voting 1
Class BSHARES SHARE PRICE HOLDING
200 1 USD 16 %
Class ASHARES SHARE PRICE HOLDING
500 3 USD 5 %Class ASHARES SHARE PRICE HOLDING
300 3 USD 3 %
ABC Ltd.
Holding
500 Shares / 1‘100 USD
Voting 1
Class ASHARES SHARE PRICE HOLDING
500 3 USD 5 %
Class BSHARES SHARE PRICE HOLDING
0 1 USD 0 %
Class ASHARES SHARE PRICE HOLDING
- 3 USD 0 %
ABC Ltd.
Holding
0 Shares / 0 USD
Voting
Class ASHARES SHARE PRICE HOLDING
500 3 USD 5 %
Class BSHARES SHARE PRICE HOLDING
0 1 USD 0 %
Class ASHARES SHARE PRICE HOLDING
100 3 USD 1 %
ABC Ltd.
Holding
100 Shares / 300 USD
Voting 1
Proof of ownership and a marketplace for sales and purchase of digital assets
Enables authenticity of a review through trustworthy endorsements for employee peer review
Decentralized prediction platform for the share markets, politics, etc.
Decentralized patient records management
Proof of ownership for digital content (Art, pictures and images)
Digitizing assets: Improves anti-counterfeit measures (Consumer electronics, automotive, degree verification)
Proof of ownership of modules in app development
Proof of ownership for digital content storage and delivery
Points based value transfer for ride sharing
Digital security trading ownership and transfer
Digitization of documents/ contracts and proof of ownership for transfers
Decentralized storage using a network of computers on Blockchain
Decentralized IoT (Home automation, industrial
automation)
Enables authenticity of a review(Helps users engage, share and collect feedback)
Decentralized internet and computing resources to every home and business
Digitizing company incorporation, transfer of equity/ ownership and governance
Provides digital identity that protects consumer privacy (Internet, car locks, customer verification, voting)
Escrow/ Custodian service(Gaming industry, loan servicing and e-commerce)
Source: GrowthPraxis
Business case overview - Distributed Ledger Technology
DLT(Use Cases)
Examples for use cases in the area of digital assets
4 – Business Applications of DLT Page 22
Proof of ownership and a marketplace for sales and purchase of digital assets
Proof of ownership for digital content (Art, pictures and images)
Digitizing assets: Improves anti-counterfeit measures (Consumer electronics, automotive, degree verification)
Proof of ownership for digital content storage and delivery
Digital security trading ownership and transfer
Digitization of documents/ contracts and proof of
ownership for transfers
Digitizing company incorporation, transfer of equity/ ownership and governance
Source: GrowthPraxis
Business cases for digital assets - Distributed Ledger Technology
DLT(Use Cases)
4 – Business Applications of DLT Page 23
Use case 1 – Plastic Bank
4 – Business Applications of DLT Page 24
Details
Instrument:Tokenized plastic credit
Lead Operator: Plastic Bank
Partners: Cognition Foundry
Countries:Haiti, Philippines, Indonesia
Volume: n.a.
Year: Founded 2013
Technology
− Permissioned network built using Hyperledger Fabric, hosted by IBM Blockchain
Benefits:
− Further incentivise plastic collection and recycling
− Transparent allocation of tokenized plastic credits
− Peer-to-peer transfer of tokenized plastic credits
Description
Developed a system of token rewards based on Blockchain that monetizes
plastic waste and records transactions at the micro-level. As these micro-
transactions add up, they form the credits that the waste collectors use to earn
useful goods that can help them to transcend poverty.
Use case 2 – Bond-i
4 – Business Applications of DLT Page 25
Details
Instrument: Tokenized bond
Lead Operator: World Bank
Partners:
CBA, RBC Capital Markets, TD Securities, other investors
Countries: Australia
Volume: $ 108m
Year: 2018 / 2019
Technology
− Permissioned platform built on a modified version of the Ethereum codebase
Benefits:
− Reduced underwriting cost− Reduced settlement and counterparty risk− Emergence of secondary market trading
Description
Automation of processes related to the purchase and ownership transfer of
bonds using DLT. 4 nodes, all run by the WB and CBA. A 5th and 6th node might
be run by TD Securities and the Reserve Bank of Australia (observer node).
Use case 3 – Daura
4 – Business Applications of DLT Page 26
Details
Instrument: Tokenized stock
Lead Operator: Daura / Sygnum
Partners:Swisscom, Deutsche Börse, Custodigit
Countries: Switzerland
Volume: -
Year: 2019
Technology
− Private Blockchain system
Benefits:
− Reduced issuing costs− Reduced transaction costs− Fungibility of shares
Description
Dematerialized digital shares (or "C-shares") are issued and transferred via a
private Blockchain platform between registered daura users by means of a
tripartite transfer agreement (OTC), represented by cryptographic tokens and
irreversibly stored on the DLT.
Use case 4 – Fundament Group
4 – Business Applications of DLT Page 27
Details
Instrument:Subordinated token-based bonds
Lead Operator: Fundament Group
Partners: Not disclosed
Countries: Germany
Volume: €250m (planned)
Year: 2019
Technology
− Public Ethereum Blockchain (ERC-20)
Benefits:
− Reduced issuing costs− Reduced transaction costs− Fungibility of securities
Description
Fully regulated and approved Primary Market transaction for issiung a
tokenized portfolio of German Commercial Real Estate – which generates a
planned annual yield of 4% plus returns from possible sales revenues.
Dividends will either be paid in Ether or EUR.
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
An overview of the Blockchain market
Protocol levelCodebase framework
Network levelPlatform operation and maintenance
Application levelNetwork usage
Open-source Closed-source (proprietary)
Open and permissionless Closed and permissioned
Derivatives Custodial services Investment funds Other
Tokenisation platformsStablecoin issuersExchanges
5 – Global Ecosystem and Trends within DLT Page 29
Conceptualising cryptoasset ecosystem actors
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
5 – Global Ecosystem and Trends within DLT Page 30
Intermediated cryptoasset activities often resemble traditional financial activities
Activity unspecific to cryptoassets: can also be found in other industries
Activity specifically enabled by the cryptoassets and Blockchain properties: no direct resemblance to traditional activities in other industries.
Activity sharing characteristics of both traditional and new activities.
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 31
The cryptoasset industry spans the entire globe
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 32
Usage (1): Estimated number of user accounts at service providers
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 33
Usage (2): Types of users
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 34
The enterprise Blockchain ecosystem is maturing
• Hundreds of live enterprise Blockchain networks are being used in production environments
• The majority of the networks covered in our study entered in production over the course of 2018 and early 2019
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 35
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 36
Lifecycle of an enterprise DLT project
How do these enterprise DLT networks come to life?
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 37
The finance & insurance sector dominates DLT activity
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 38
The majority of live networks are designed for shared use b/w partners
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 39
Enhanced ecosystem reconciliation provides multiple benefits
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 40
Enterprise DLT strategies are focused mainly on revenue generation
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 41
Increased convergence between private and public DLTs
5 – Global Ecosystem and Trends within DLT
CCAF (2019) 2nd Global Enterprise Blockchain Benchmarking Study
Page 42
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
Why tokenize assets?
Reason 1: Security issuance w/o DLTHow tokenization could affect the primary market
Issuer / Corporate
Investment bank1
Central Securities
Depository
International Central Securities Depository
Global custodian
Sub-custodian safekeeping
Investor
Fiat currency
NoteDematerialisation
Identifier
Dematerialised note
Fiat currency
Fiat currency
Reconciliation (Back Office)
Fiat currency
Dematerialised note
Simplified illustration of process
6 – Deep dive: Tokenization of Assets Page 45
1Note: Might act as Payment Agent
Reason 1: Security issuance with DLTHow tokenization could affect the primary market
Issuer / Corporate
Distributed Ledger Technology
(“Blockchain”)
Service providers
Investor
Digital asset
Tokenization Cash on ledger
Smart contracts
Digital asset
Cash on ledger
Atomic swap (DVP)
Infrastructure provider
Future Role
▪ Financial and legal advisory▪ Structuring, placement,
underwriting
Future Role
▪ Key Pair storage (wallets)▪ Platform for digital assets▪ Digital asset registry
Simplified illustration of process
6 – Deep dive: Tokenization of Assets Page 46
Reason 2: Security Trading w/o DLTHow tokenization could affect the secondary market
Seller
Clearing
Exchange Buyer
Fiat currency
6 – Deep dive: Tokenization of Assets Page 47
Custodian Custodian
Central Securities
Depository
Fiat currency
Dematerialised note
Dematerialised note
Simplified illustration of process
Reconciliation Reconciliation
Broker Broker
Note: The term Blockchain is used here synonymously with DLT
Reason 2: Security Trading with DLTHow tokenization could affect the secondary market
Seller Market place Buyer
6 – Deep dive: Tokenization of Assets Page 48
Cash on ledger
Digital asset
Distributed Ledger Technology
(“Blockchain”)
Smart contracts
Cash on ledger
Digital asset
Atomic swap (DVP)Service providers Infrastructure Provider
Future Role
▪ Transparent market data, best execution, liquidity
▪ Consolidation of trades with DLT
Future Role
▪ Key Pair storage (wallets)▪ Digital asset registrar
Simplified illustration of process Broker Identity …
Heat Map – Digital Asset Value ChainPotential impact of digital assets on existing stakeholders
Issuer Issuance Registration Trading Settlement Management Investor
xIssuer
Investment bank
CSD
Payment agent Exchange CCP
Settlement agent
Custodian
Broker
Investor
Impact of Digital Assets on Role of Stakeholderimproved challenged
• Tokenization of security through smart contracts
• Direct issuance of digital assets on the primary market
Regulator
• Allocation and payment (DvP) through atomic swaps
• Filing with regulator and approval of smart contracts
CSD
• Listing of digital asset and on-chain trading
• Market making and price discovery
• Storage of private keys
• Monitoring of security registry
6 – Deep dive: Tokenization of Assets Page 49
• Consolidation of trades with DLT (off-chain trading)
Securitization (tokenization) of assets
Real estate fund
Shares
DLT will lead to decreased
transaction costs, improved fungibilityand fractionalisation
of ownership
1 pixelart
Fractionalshares
1 sqmm real estate
Capitalization of object/asset
Min
imu
m c
ap
ita
liza
tio
nto
be
eff
icie
nt
6 - Excursus: Tokenization of Assets
Illiquid asset(Art, IP)
Page 50
The asset universe - bankable and non-bankable assetsTokenization creates new asset classes and revolutionizes existing ones
Bankable assets
• Stocks, profit participation certificates, currencies, bonds
• Can be directly created on the Blockchain
• Not necessarily backed by real assets
• Issuers must be trusted that value is behind the asset
Non-bankable assets
• Any kind of real assets (real estate, art, patents, certificates, coupons, cars)
• Ownership can be fractionalized and fungibility of asset is created
• Trust issuer that (tangible) asset exists in described conditions
6 – Deep Dive: Tokenization of Assets Page 51
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
On average, three distinct authorities have issued cryptoasset-related statements per jurisdiction
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Overlap of mandates and regulatory perimeters
7 – Regulatory Landscape Page 53
Timeline of first official statements by authorities
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 54
Timeline of first guidance issuance: security or not?
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 55
Existing regulation Application of existing laws or regulations to cryptoasset activities
Bespoke regulationNew law or regulation enacted or issued
specifically to regulate cryptoasset activities
Retrofitted regulationAmendment of existing laws or regulations to include one or more cryptoasset activities
Bespoke regulatory regimeA distinct regulatory framework applied to a set of activities, of which cryptoasset activities are but one aspect
Regulatory responses can be grouped into four categories
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 56
‘Retrofitting’ prevails when level of cryptoasset activity is high
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 57
ICOs and exchanges are the main focus of regulatory attention
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 58
Security vs. ”non-security" Custodial vs. non-custodial wallet services
Cryptocurrency vs. fiat currency trading pairs
Not all regulators make the same distinctions between activities
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 59
Thailand’s regulatory approach to cryptoassets
Relevant regulationEmergency Decree on Digital Asset Businesses B.E.
2561
Type of regulatory
responseBespoke regulation
Responsible regulatory
authoritiesSecurities and Exchange Commission (SEC)
Regulated activitiesToken portal service provider, exchange, broker,
dealer
Distinction b/w security
and non-security tokensYes
Distinction b/w custodian
and non-custodianYes
Supported assets Both cryptoassets and fiat currencies
7 – Regulatory Landscape
CCAF (2019) Global Cryptoasset Regulatory Landscape Study
Page 60
Roadmap of the Liechtenstein Token ActS
tart
of
the
wo
rkg
rou
p
20172016
Bu
ild
up
Kn
ow
led
ge
Ide
a T
oke
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on
tain
er
Mo
de
l
2018/03
Fir
st p
ub
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an
no
un
cem
en
t
2018/08
Go
ve
rnm
en
t p
ub
lish
es
con
sult
ati
on
rep
ort
2018/11
Public consultation
Imp
lem
en
tin
gfi
nd
ing
sfr
om
Pu
blic
Co
nsu
lta
tio
n
2019/06/06
firs
tre
ad
ing
in p
arl
iam
en
t
2019/10
Se
con
d r
ea
din
gin
pa
rlia
me
nt
2019/?
TV
TG
in f
orc
e?
Parliament
Now
7 – Regulatory Landscape Page 61
The Liechtenstein approach
Is regulationneeded?
Build up knowledge
(DLT, Blockchain, AI,…)
Frameworkcompatible?
Token container model
7 – Regulatory Landscape Page 62
Dedicated Blockchain regulation in LiechtensteinLeading jurisdiction for Blockchain regulation
• Dedicated Blockchain regulation
• 58 Pages Law, 51 Articles, Full report 384 pages
• Amendments of:– Due Diligence Act (SPG)
– Financial Market Supervision Act (FMAG)
– Corporate Law (PGR)
– Trade Law (GewG)
• Download available in English:– https://nlaw.li/tvtgen
7 – Regulatory Landscape Page 63
Token Container ModelContainer with specific functions
TT-System (Transport, storage, smart contracts,…)
Assete.g. a diamond
Right
Right
Custody
7 – Regulatory Landscape Page 64
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
Key take-aways
Page 668 – Conclusion
Thought Leadership Program - Digital Asset Platform
Digital assets are considered highly relevant for organisations in Thailand, with significant future potential to disrupt existing business models. However, there still is uncertainty about their applications and in particular Distributed Ledger Technology (DLT).1
The emergence of digital assets and DLT challenges existing roles within capital markets, but also opens up unparalleled opportunities for existing and new players. There is great potential, but roles have to evolve.
A comprehensive regulatory approach, together with first productive DLT solutions, will be key for the future evolution of the digital asset ecosystem in Thailand. However, first steps can be undertaken within current regulation.
The global digital asset ecosystem is maturing. In hundreds of projects, mainly in the financial industry, DLT is used in production environments.
Sourced from conducted stakeholder survey (n = 22)
Agenda
1 - Introduction
2 – SET Digital Asset Platform
3 – Introduction to DLT
4 – Business Applications of DLT
5 – Global Ecosystem and Trends
6 – Deep Dive: Tokenization of Assets
7 – Regulatory Landscape
8 - Conclusion
9 – Q & A
3rd October 2019
THANK YOU!
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