NEM & Propine — Delivering Asset Tokenisation using Symbol blockchain
Propine has recently announced their partnership with NEM. Propine is a full end-to-end securities service and this partnership between NEM and Propine will enable users to issue, custody, manage and customize security tokens on Symbol. Users will be able to take advantage of Propine’s fully compliant custody services to ensure safe token maintenance and delivery.
In this Q&A with Wong Liang Zan, Propine’s Chief Technology Officer, we delve into the partnership and why they chose Symbol, how they integrated Symbol, the technicalities of the integration, and a bit about asset tokenization.
Hi Zan and thanks for agreeing to a Q&A for our ecosystem. Could you please start off by introducing Propine and what you do?
Hello. I’m Zan, I look after all aspects around product and development in our company. Propine was founded by Tuhina (co-founder and CEO) and myself in 2018 as a digital asset custodian for institutions. Our company aims to democratize access to capital markets with end-to-end securities services. Through our state-of-the-art, blockchain-agnostic platform, we work with companies to manage risk and regulatory compliance for digital assets by tokenizing capital market products as well as the vehicles to access them.
We are admitted into the Monetary Authority of Singapore’s regulatory sandbox and granted the first Capital Market Services licence to provide independent digital asset custody services to institutional clients. In addition, we offer a full range of services adapted to the latest financial markets and regulatory trends across custody, asset servicing, trade settlement, investor and regulatory reporting and global security issuers.
Why did you choose NEM (Symbol) for integration?
Selecting Symbol was a natural choice as the blockchain is built with security token issuance in mind. Most of the common use cases, like providing for a multisig wallet, creating security tokens, as well as all the security aspects, are taken care of by Symbol. Unlike other protocols, which requires extra effort, utilising Symbol makes our work much easier, thereby allowing us to help our customers to go to market with less time and less cost.
What benefits do you see from the Symbol features set that support securities token issuances specifically?
Symbol provides a comprehensive set of features that cover 90% of the common needs for a security token issuance. Integral processes like creating a compliant token and fine-grained control over transfers, are well thought out, making their implementation quite straightforward in the protocol. Security of assets is taken care of by the protocol itself. Having these features built into Symbol ensures interoperability for our customer’s assets. The protocol’s design is flexible enough for us to accommodate the final 10% of the use cases which requires customisation. As the protocol improves its feature set and performance, we get to enjoy the benefits without additional cost. Compared to other protocols, where security token issuance is an afterthought, Symbol lifts a huge burden off our shoulders.
What were the steps taken to integrate Symbol with Propine?
There are three phases for the protocol integration effort:
During the evaluation phase, we learnt how the protocol works, what it could and couldn’t deliver, and what were the cryptography primitives used. After gaining a thorough understanding of the protocol, we then evaluated its suitability to our solution. We collaborated deeply with the NEM technical team to build the best solution for the end-user.
With an approach in mind, we created prototypes which tested those assumptions. The prototyping process helped us understand the protocol at a deeper level, while getting familiar with its characteristics.
After the prototype was completed, we commenced integration into our solution. The NEM team has been extremely responsive, knowledgeable and we feel confident with the solution we’ve put together.
Asset Tokenisation is one of Symbol blockchain’s key areas of focus. How does Propine see the future of the partnership with NEM and its Symbol blockchain and what scenarios could you envision for such integration?
Our partnership is a natural fit. Both companies have the same vision — to significantly improve infrastructure for asset tokenization and play a large part in its adoption.
Symbol is a hybrid blockchain, built specifically with enterprises in mind while Propine’s solutions are catered for institutional clients as well. This is just the first step in a long journey which will see significant adoption on Symbol with Propine providing investment banking activities supporting this choice. Together we look forward to evangelising this space and building the capital markets of the future — one line of code at a time.
Under the MAS FinTech Regulatory Sandbox, firms like Propine can experiment to offer innovative and compliant solutions to the financial industry in a live environment. The sandbox includes appropriate safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system.
Security tokens, depending on their exact features, can fall under the full scope of relevant security regulations, which can vary significantly jurisdiction to jurisdiction. Consequently, many of the advantages of the security tokens are undermined if the infrastructure for providing these services is not regulated and compliant.
Besides, there has been considerable uncertainty in the past as to how a particular security token should be considered within the law. Addressing these concerns has meant involvement of a variety of actors — governments, central banks and private companies and now there are clear signs that traditional market infrastructure is adapting to the token economy, as seen in the example of Propine receiving traditional CMS (Custody) license.
Having a clear regulatory framework is of vital importance for the safe development of the token economy. This allows hesitant but eager institutions waiting on the sidelines, to be able to participate in tokenization. Compliant infrastructure is a rock bed on which the foundations of the security token ecosystem will be created.
Symbol blockchain is a Hybrid blockchain which offers both public and private options. In the world of regulated securities, do you see a benefit for these types of hybrid systems over simply public or private offerings?
The main distinction between public and private blockchains revolve around three main questions:
1. How freely can participants join and leave the network — is there a gatekeeping function to access the blockchain?
2. Are the participants in the network allowed to execute the consensus protocol and maintain the shared ledger without any centralized permissions?
3. How are various types of data on blockchain accessed — what parts are publicly available and what parts are private and who determines access to private data?
Symbol is a hybrid blockchain that uses the best of both private and public blockchain solutions. It enables controlled access and freedom at the same time. While transactions are not made public, they can still be verified if needed.
Just like private blockchains, the hybrid version ensures privacy for transactions. This is especially crucial to use blockchain for digital securities in a compliant manner. Securities are highly regulated products that need to comply with Singapore’s PDPA and European’s GDPR policy and regulators’ privacy requirements.
We believe that appropriate use of hybrid blockchains will allow the capital markets to become more efficient and reap rewards of both centralised and decentralised approaches in a variety of contexts. For example, decentralised sharing of data within a permissioned ecosystem will enhance the benefits while mitigating the downsides of both approaches creating a potential goldilocks scenario.
For more information about Propine please visit their website.