Deal focus: iStox finds firmer footing

Credibility is arguably the biggest issue for any company delving into the rapidly growing but still arcane world of cryptographic tokens. Getting an investor that traces its history back to 1908 doesn’t hurt.

Singapore digital securities platform operator iStox pulled this off in early 2020, when it secured backing from Tokai Tokyo Financial Holdings, a pedigreed Tokyo-listed brokerage services provider. Tokai Tokyo’s confidence inspired government investors Development Bank of Japan and JIC Venture Growth Investments, a VC arm of Japan Investment Corporation to join in. In the erratic policy environment of crypto, state-affiliated sponsorship is a considerable coup.

A Series A round has now closed at $50 million, with additional support from Singapore Exchange, Korea’s Hanwha Asset Management, and two more Japanese investors: Mobile Internet Capital and Juroku Bank. It’s worth noting that Japan is not on the immediate agenda. The fresh capital is slated for expansion in Europe, Australia, and China, where an approvals process with Chongqing Monetary Authority is underway.

IStox’s core business is facilitating the trading of tokenized securities via a regulated platform, which provides accredited investors – including some retail investors – access to asset classes such as private equity, private debt, hedge funds, real assets, bonds, and start-ups. Securities are fractionalized using blockchain technology, allowing for investments smaller than $20,000.

“With global interest rates likely to stay low for a longer period, individual investors in many countries may be inclined to increase the share of public equities in their portfolios, as they seek higher yields,” says Oi Yee Choo, iStox’s chief commercial officer. “This may drive the share prices of public companies above fundamental valuations. In such an environment, private market investments can help investors build more balanced and diversified portfolios, offering more stable returns in the long run.”

Singapore has proven a conducive environment for this kind of play, with platforms pooling retail capital for combined fund commitments estimated to represent up to 10% of the corpus of some local funds. As competition mounts, so will the motivation to differentiate.

For its part, iStox has moved into the investing game itself, teaming up with Singapore multi-family office ICHAM to launch a pre-IPO fund touted as the first of its kind in digital securities form. The fund has raised $20 million and will target unicorns with a view to exiting within three years. 

The company also considers itself unique as a multi-asset class platform versus many competitors that only deal in private equity.

“The securities that are issued by iStox and traded on our platform are truly digitized securities – they are created on the blockchain. This distinguishes us from platforms that choose to do issuances or secondary trading in the traditional way before recording transactions on the blockchain after they occur. The latter approach is not scalable and will confront many of the same manual processes and inefficiencies found in the traditional issuance industry,” says Choo.

“The settlement time offered by platforms that do not truly digitize securities also tends to be longer – a few working days – as opposed to the instant settlements available on iStox.”

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• Topics
• Southeast Asia
• Early-stage
• Financials
• Technology
• Singapore
• The Development Bank of Japan (DBJ)
• blockchain
• Financial Services
• Fintech