Mon | Mar 27, 2023

Digital assets for JSE listing this year

Published:Friday | January 28, 2022 | 12:08 AM
Headquarters of the Jamaica Stock Exchange, Harbour Street, Kingston.
File Headquarters of the Jamaica Stock Exchange, Harbour Street, Kingston.

The Jamaica Stock Exchange, JSE, expects to allow trading of tokenised listings this year through a platform developed by Blockstation, its Canadian partner. The move will usher in trading in digital assets and payments using digital currencies, including the controversial cryptocurrencies that have been frowned on by market regulatory authorities worldwide, including the Jamaican central bank and securities watchdog the Financial Services Commission, FSC.

“We are working towards providing a digital asset platform this year,” JSE Managing Director Marlene Street Forrest confirmed to the Financial Gleaner in a written response to queries on Wednesday.

The JSE digital trading portal would allow anyone with a JSE account to trade online in digital currencies and other tokenised assets, similar to trading in regular equities. Blockstation conducted tests four years ago with JSE broker-dealers. Those tests were meant to be a precursor to the roll-out of the digital assets platform that should have gone live for trading in mid-2020, but the COVID-19 pandemic delayed that start-up.

“We hope to get digital assets and digital currencies hopefully this year,” Blockstation CEO and co-founder Marko Hafez told participants at the 2022 JSE investments and capital markets conference, where he was a presenter on Wednesday.

The announcement signals a forward movement on plans that have been in the pipeline for several years for a collaboration between the JSE and Blockstation to result in digital assets offering to investors through the Jamaican equities exchange. The JSE partnership with Blockstation was first announced in 2018.

In 2020, plans were announced for digital assets initial public offerings or IPOs by four companies: Bred, a real estate fund based in Canada; WiPay, a Trinidad-based fintech firm; VeleV Capital, a Canadian investment company; and the Australian renewable energy outfit Lotus Energy. No update was provided on whether these firms are now all ready to come to market this year with tokenised assets.

Rise in cryptocurrency trading

The renewed drive to get the digital assets platform up and running comes amid a wider rise in trading in the cryptocurrency market, particularly the largest coins, bitcoin and ethereum. Those two digital currencies have a combined market value of more than US$1 trillion in a crypto market worth more than US$1.6 trillion.

The downside is that cryptocurrencies are very unstable and prone to wild, unpredictable swings in value, with small market moves and comments from influential figures having the potential to wipe billions of dollars off the market in minutes. Bitcoin, which started life at a few US cents in value some 13 years ago, traded at an all-time high of more than US$67,000 per coin in November last year, before sinking to below US$36,000 in trading up to Thursday.

Crypto hawks are quick to seize on the huge market value to sell the benefits of crypto trading to investors. In his pitch to investors and policymakers assembled at the JSE conference this week, Hafez pointed to flows for other investments and platforms that could arise from the huge crypto market.

“So, you really are opening up the doors to allow investors holding bitcoin to send to brokers/member-dealers with the JSE, to exchange it for US dollars or Jamaican dollars and participate in an offer. You are opening up a whole new flow of investments across the globe,” Hafez declared.

The planned JSE foray into digital assets is not confined to trading, but will involve digital payments as well. Hafez explained that even for regular IPOs, the use of the Blockstation platform offers the benefit of lower wire transfer fees for prospective investors and lower legal fees for listing entities.

The entities developing the digital assets trading platform and payments system are aware of the concerns harboured by the Jamaican market regulators who, in the past, have issued warnings about the riskiness of crypto trading. The JSE and Blockstation are are said to be engaged in discussions with the FSC, with the result so far being the avoidance of terms such as ‘digital securities’ and the use of the ‘digital currencies’ phraseology in the promotion of the new investment offerings, a seemingly small change that appears to carry big regulatory implications.

Blockstation has its eyes set beyond just the Jamaican investor market. It continues, it said, to work with the Barbados Stock Exchange and another exchange in the region that it says it cannot name, in keeping with non-disclosure rules in that jurisdiction, the company’s chief enterprise architect and co-founder, Jai Waterman, said in his address at the JSE conference.

Blockstation was formed in 2014 to facilitate the listing of digital assets on exchanges.