Unveiled this week, the new Instant Access service is built atop the technology of AirSwap, a ConsenSys-backed decentralized exchange protocol on Ethereum. The result is a system that gives institutional investors a way to transact in security tokens directly and thus without intermediaries.
To make this novel kind of P2P trading a reality, Instant Access has in-built compliance safeguards so that only approved traders can make use of the service, Securitize said:
“Once an issuer decides to enable the Instant Access feature, any potential buyer who has KYC/AML approval from, and is registered with the issuer, can purchase the digital security from the holder if the holder has shared the transaction link with them.”
Atomic Swaps for Securities Tokens
A reputable intermediary manages trust and risk in traditional security transactions. Yet how to accomplish security token exchanges trustlessly in the context of P2P trades that don’t have third-party referees?
Notably, Securitize’s answer to that question is atomic swaps.
Atomic swaps are a powerful cross-chain trading technique that allows users to rapidly exchange two cryptocurrencies across two different blockchains, and they’re powerful because they’re rigorous. They either execute correctly or don’t execute at all, as Securitize explained:
“Instant Access solves the counter-party risk on personal peer-to-peer transactions of securities by ensuring that when a trade is arranged between a seller and the buyer, the buyer cannot receive the securities without paying the corresponding amount to the seller […] This is known as an atomic swap in blockchain terminology and it ensures that both tokens […] complete the transaction or that the transaction does not happen at all.
This reliance on atomic swaps makes Securitize’s Instant Access fundamentally different than the security token trading we’ve seen in the “wild” of Ethereum’s rising decentralized finance sector to date.
Exhibit A on that front is RealT, a tokenized real estate project that has securities representing its properties trading on the Uniswap decentralized exchange, albeit only open to whitelisted addresses.
Securitize has seen itself at the heart of more than a few big headlines in recent months.
Last September, the security token firm raised $14 million in strategic funding from global heavyweights like Banco Santander and Mitsubishi UFJ Financial Group. Then in November, the company saw another seven-figure sum of strategic funding from SBI Investment, a subsidiary of the major Tokyo-based financial services firm SBI Holdings.
Weeks later, Securitize used some of its newfound war chest to acquire Japanese blockchain consultancy firm BUIDL, which specializes in digital securities.
“By acquiring BUIDL, a proven security token leader and blockchain innovator in Japan, Securitize is immediately better positioned to help develop the institutional-grade security token industry in Japan, Asia and beyond,” Securitize co-founder and CEO Carlos Domingo said at the time.
The hot streak continued into 2020, as word broke in February that Sony Financial Ventures, an arm of Sony Corporation, had invested a six-figured sum in Securitize. Junji Nakamura, the director of Sony Financial Ventures, said the security token firm was doing pioneering work around “a new asset class with astonishing abilities.”
Securitize has kept the pace up in the months since as evidenced by the release of Instant Access, which the firm has said will bring “new liquidity options to issuers and their investors without compromising safety, security, and compliance.”
The grand question for now is whether the company can keep its momentum up even at a time when the security token industry is undergoing something of a chilled period.