LABUAN, Oct 30 — Fusang Exchange has announced the successful tokenisation and listing of a digital sukuk representing the corresponding underlying sukuk issued by the International Islamic Liquidity Management Corporation (IILM).
IILM is an international organisation established to address liquidity management challenges faced by Islamic financial institutions globally and acts as the programme administrator of the underlying sukuk.
Fusang Exchange chief executive officer Henry Chong said this tokenisation exercise is the world’s first digitisation of an institutionally-issued sukuk and is expected to revolutionise the Islamic investment landscape by providing investors access to shariah-compliant high-quality liquid assets (HQLA).
“The tokenisation and listing exercise was completely led by Fusang, utilising its proprietary Fusang Depository Receipt (FDR) structure to ‘wrap’ the underlying sukuk into a digital form,” he said in a statement today.
He said the FDR retained full transparency and certainty of investors’ legal rights and adhered to Shariah standards set by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).
Zico Shariah Advisory Services acted as the Shariah adviser for the issuance of these ERC-20-compliant tokens, the leading and most popular Ethereum standard for token issuance.
Henry said similar to American Depository Receipts (ADRs) and Hong Kong Depository Receipts (HDRs), FDRs represented a beneficial interest in an underlying security, which could then be listed, traded and settled on Fusang Exchange.
“FDRs are fully redeemable for the underlying IILM sukuk and are secured by third-party independent custodians and FDRs ensure all parties have uniform legal rights and custodial arrangements,” he said.
He said Fusang’s next-generation tokenisation technology and standardised legal framework has created the world’s first truly global digital stock exchange.
“Our institutional-only digital infrastructure is built to serve, not disrupt, traditional financial intermediaries by enabling trading, custody and clearing of tokenised assets through a fully-regulated ecosystem,” he said.
Fusang Exchange is a member-only network of regulated financial institutions, mirroring the operating structure of other non-digital stock exchanges, which facilitates the tokenisation, listing, trading, settlement and custody of digital securities, all backed by real-world assets.
Fusang Exchange itself is regulated and supervised by the Labuan Financial Services Authority (Labuan FSA), an agency under the Ministry of Finance (MoF).
Henry said Fusang is encouraged by the Federal Government’s commitment to develop the Islamic financial market as evidenced by announcements in the Malaysian Budget 2024, which is aligned with Fusang’s aim to revolutionise Islamic financial markets via digital initiatives.
Labuan FSA director general Nik Mohamed Din Nik Musa said the agency is excited to see emerging technologies harnessed within a regulated environment, driving innovation in Islamic finance.
“We envisage the new Guidelines on Labuan Securities Token Offering would further spur the development of tokenised securities in Labuan.
“Leveraging on Labuan International Business and Financial Centre’s (Labuan IBFC) robust regulatory environment, Fusang Exchange’s innovation has provided the platform for listing of a unique tokenised structure, cementing Malaysia’s leadership role in Islamic digital financial services.
“This issuance bodes well with the recent Budget 2024, providing full tax exemption on Islamic Finance transactions by Labuan entities aimed at positioning the jurisdiction as an Islamic finance hub,” he said.
Meanwhile, Fusang president Kelvin Ung said Fusang provided banks and brokers access to institutional Islamic investment products and greater global market distribution.
“This solves several legacy issues, namely opening up of institutional markets and providing seamless digital access to investable assets.
“We will continue to issue similar tokenised securities backed by government-linked assets as we believe demand for high-quality liquid assets will continue in the current high interest rate environment.
“Global banks and brokers can now access these tokenised securities via Fusang Exchange,” he added. — Bernama
