Fusang Exchange tokenizes and lists digital sukuk backed by IILM

fusang exchange tokenizes and lists digital sukuk backed by iilm

Fusang Exchange, a Malaysia-based digital stock exchange operator, has on Monday announced the successful tokenization and listing of a digital sukuk representing the corresponding underlying sukuk issued by the International Islamic Liquidity Management Corporation (IILM).

Fusang Exchange said in a statement that this tokenization exercise is the world’s first digitization of an institutionally-issued sukuk and is expected to revolutionize the Islamic investment landscape by providing investors access to shariah-compliant high-quality liquid assets (HQLA).

IILM is an international organization established to address liquidity management challenges faced by Islamic financial institutions globally and acts as the program administrator of the underlying sukuk.

According to the statement, the tokenization and listing exercise was completely led by Fusang Exchange, utilizing its proprietary Fusang depository receipt (FDR) structure to “wrap” the underlying sukuk into a digital form.

The FDR retains full transparency and certainty of investors’ legal rights and adheres to Shariah standards set by the Accounting and Auditing Organization 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.

Similar to American Depository Receipts (ADRs) and Hong Kong Depository Receipts (HDRs), FDRs represent a beneficial interest in an underlying security, which can 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. FDRs ensure all parties have uniform legal rights and custodial arrangements.

“Fusang Exchange’s next-generation tokenization technology and standardized 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 tokenized assets through a fully-regulated ecosystem,” said Henry Chong, Chief Executive Officer of Fusang Exchange.

He also said that Fusang Exchange is encouraged by the Malaysian government’s commitment to developing the Islamic financial market, as evidenced by announcements in the Malaysian Budget 2024 – which aligns with Fusang Exchange’s aim to revolutionise Islamic financial markets via digital initiatives.

It is noted that 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, under the Ministry of Finance, Malaysia.

“We envisage the new Guidelines on Labuan Securities Token Offering would further spur the development of tokenized securities in Labuan,” said Nik Mohamed Din Bin Nik Musa, Director General, Labuan Financial Services Authority.

He said leveraging on Labuan IBFC’s robust regulatory environment, Fusang Exchange’s innovation has provided the platform for listing of a unique tokenized structure cementing Malaysia’s leadership role in Islamic digital financial services.

He also said 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.

Fusang Exchange President Kelvin Ung said that the firm gives banks and brokers access to institutional Islamic investment products and greater global market distribution.

He opined that 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 tokenized 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 tokenized securities via Fusang Exchange,” he added.

Fusang Exchange is a global digital stock exchange built to enhance rather than replace traditional finance.

Operating with full regulatory oversight, the firm provides institutional-grade trading, custody and settlement infrastructure for securities, alternative investments, and private assets.


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