Issuance of tokens in CORDA


(Eugene Kagansky) #1

This is regulatory / risk management discussion, but it has a huge impact on technical implementation.

Here is a set of questions related to issuance of tokens into CORDA network.

  1. Who has the authority to issue currency tokens into the network?
    1a. If only regulators like FRB, then can they issue foreign currency tokens or domestic currency tokens only?
    1b. If any financial institution, then what reserve of fiat currency should be pledged against currency tokens?

  2. Who has the authority to issue security tokens into the network?
    2a. If only regulators like SEC, then what is the application/approval process?
    2b. If any financial institution, then how regulators can enforce trade susspension, etc?

  3. Who has the authority to issue commodity tokens into the network?
    3a. If only regulators like CFTC, then what is the application/validaiton/approval process?
    3b. If any network participant, then what is there restriction to the number of tokens?

  4. Who has the authority to issue property tokens into the network?
    4a. If only regulators, who would that regulator be?
    4b. In any network participant, then who will ensure standartization of tokens?

etc


(Mike Hearn) #2

Hi Eugene,

  1. A token is governed by a CorDapp and anyone can write those. Thus any member of a Corda compatibility zone (network) can issue tokens to their hearts content. The backing reserve is up to the issuer. One obvious way to do it is to have money held on a special account with the central bank’s RTGS.
  2. Per (1), the answer is “it’s up to the app in question”. Because anyone can write an app, that means someone could write a CorDapp that requires the SEC to sign every issuance, or the European equivalents, or no regulator at all, or allow the user to specify the regulator. It’s really an app design question at this point. Having an authority that can suspend trading in a token can be done in a variety of ways that trade off control vs availability e.g. if the regulator’s computers go offline for a while. Requiring the regulator to countersign every trade gives them total visibility but raises the question of why not just mandate using a SEC-run database to begin with. In particular it’d mean that if the SEC went offline all trading would halt, which seems suboptimal. So there can be other ways of doing it. It’s a topic for another post.
  3. See above.
  4. See above.

Hope that helps!