‘Better than blockchain’ new asset trading system unveiled
The chief scientist of the Capital Markets Cooperative Research Centre, Michael Aitken, has demonstrated a new asset trading system – known as digi.cash – which he says will allow a broad range of financial assets to be traded at virtually no cost with immediate settlement, potentially disruptive to existing markets like the Australian Securities Exchange.
Digi.cash works via a system of “tokenisation”, where a digital representation is made of a physical asset. When the “token” is sent from one person to another, settlement is instant. The receiver can then “withdraw” the real asset.
In a presentation to the Financial Review Innovation Summit, Professor Aitken, who received the Prime Minister’s innovation award in 2016, said the technology was superior to blockchain, versions of which are being considered by the ASX to make clearing and settlement more efficient and by Computershare to streamline registries.
Professor Aitken said he hoped the digi.cash system might be considered as an alternative. “I am not convinced about blockchain myself,” he said.
“We’re looking to work with these guys so we can take it to the world….This will open up the ability to trade a whole lot of assets that currently aren’t traded.”
But he said the system would be disruptive to the ASX, given it earns around $300 million a year from clearing and settling the cash equities and derivatives markets.
Professor Aitken showed the summit a demonstration of the system.
After a digital representation of an actual asset is created, the asset itself is held by digi.cash (for example, cash in a bank account, gold in a physical vault, or cryptocurrencies in a virtual vault). Assets are stored as a 512 byte record, which can be transferred. When an asset moves, the old token is cancelled, a new one is created with the same value as the asset that was moved. The recipient then cashes out the asset.
“I can basically move in and out of Australian dollars and currencies and any type of financial instrument,” Professor Aitken said.
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