Future of Finance


Security token markets primed to explode as FINP2P protocol solves the inter-operability problem

Security token markets primed to explode as FINP2P protocol solves the inter-operability problem

In late March 2021 a path to liquidity and growth opened in the security token markets. The Private Markets Digitization Steering Group (PMDSG), a group of banks, financial market infrastructures, technology vendors and FinTechs formed under the umbrella of Global Digital Finance in the spring of 2020 went public with a specification that will make inter-operable blockchain networks a reality for the first time.

FINP2P is a protocol that allows investors to execute token trades on one network and settle and custody them in another, irrespective of whether the networks are built on Ethereum or Corda or any other blockchain technology. This portability could be the decisive breakthrough that capital markets blockchain needs to spark exponential growth. Dominic Hobson spoke to Anthony Woolley, head of business development at Ownera, an institutional-grade blockchain network for security tokens, who doubles as co-chairman of the PMDSG.

Questions that are being asked

1. Lack of inter-operability between different blockchain networks is a problem. Is that the problem that FinP2P solves?

2. What are the benefits of solving the problem?

3. And who enjoys the benefits?

4. Does FinP2P cover public as well as private blockchain networks?

5. How many digital security functions (e. g. on-boarding issuance, buy/sell orders, DvP settlement, collecting entitlements, custody etc.) does FinP2P cover now – and how many will it cover in the future?

6. Is the intention that FinP2P provides an infrastructure for others to exploit in the form of apps?

7. You are currently at the pilot stage. How long till you go into full production?

8. Can FinP2P also eliminate inter-operability obstacles between blockchain networks and traditional securities markets?

9. Network effects are in sense what FinP2P delivers, and it’s open source, but it still needs to be adopted by market participants. What are the obstacles and how are you clearing them?

10. What does the history of “standards” in the blockchain markets (e.g. ERC 20) tell us about the likely pattern and pace of adoption?

11. Which blockchain technologies (e.g. Fabric, Corda, does FinP2P cover?

12. What’s the difference between a specification and a standard?

13. Are specifications an alternative to standards – or do we still need standards such as SWIFT FIX and FpML? Is this the token market equivalent of TCP/IP or of SWIFT, FIX and FpML?

14. Is a message standard, such as ISO 20022, relevant to the work you are doing? 

15. The initial use case, as for tokenization in general, is the private markets, for the obvious reason they are fragmented. Are there any additional obstacles in supporting the public markets, which are less fragmented?

16. Are there any limits to the type of digital instrument (e.g. crypto-currencies, payment tokens, utility tokens, security tokens, NFTs) FinP2P can support?

17. APIs are central to the specification. Can you be specific about how they will work and what they make possible?

18. You make use of digital identities. How do you create them in terms of selecting attributes and enrolling firms and updating them?

19. Unlike traditional securities markets, which maker users of registers of owners, ownership of secure tokens inheres in the token itself. How do your digital identities accommodate that?

20. Are digital identities core to the project or just an added bonus?

21. Do you foresee a future in which institutions need not be afraid of public blockchains (zero knowledge proof is sometimes mentioned in this context)?

22. The ten firms in the PoC stage include DTCC and R3, but no other establishment firms. Who are the enemies of this innovation? And are the enemies the same as the likely victims?

23. How big could this get?  – do you think FinP2P could be the crucial technological fix that propels security tokens into self-sustaining growth?