The financial tokenization transforming the financial strategies of Japanese companies ── JP Morgan's "Kinexys" executives appear live 【N.Avenue club 2nd term 9th round table report】 | CoinDesk JAPAN

The evolution of digital assets is set to significantly change the landscape of finance, and this wave is also sweeping over Japan.

The largest U.S. bank, JP Morgan Chase, is developing the next-generation digital asset platform "Kinexys," leveraging asset tokenization to open up new possibilities for financial transactions. In Japan, tokenized financial products are rapidly gaining popularity, particularly in the security token (digital securities) market backed by real estate such as condominiums and hotels, as well as corporate bonds issued by companies.

As tokenization becomes a new trend in finance, N.Avenue club, the largest domestic Web3 business community with corporate membership focused on researching and promoting Web3, held its 9th round table of the second term on March 13 to discuss this theme.

At a roundtable titled "How Financial Tokenization is Changing Japanese Companies' Strategies," presentations were given by executives from JP Morgan's Kinexy, the Japanese representative of Securitize, one of the world's largest security token platforms, lawyers from major domestic law firms involved in numerous securities issuance projects utilizing security tokens for fundraising, and digital strategy officials from megabanks. Group discussions were also held among participants.

The N.Avenue club's roundtable is a closed event for members only, so we will report on part of it here.

How Financial Tokenization is Changing the Financial Strategies of Japanese Companies

At the beginning, the online presenter was Mr. Bashar Toprak, who serves as the EMEA head of Kinexys Digital Payments at JP Morgan. Mr. Toprak reflected on the history of blockchain operations at JP Morgan and explained the functions and features of Kinexys.

Kinexys has four functions, one of which is Kinexys Digital Payments, a remittance solution that allows near real-time transfers 24 hours a day, 7 days a week. It has been in operation for over four years, with cumulative transactions amounting to 1.5 trillion dollars. It has features such as programmable payments that allow remittances to financial institutions other than JP Morgan, where conditions can be set in advance as triggers for automatic payments.

In the world of international remittances, SWIFT is mainly used, but Mr. Toprak stated that "it will take time for the penetration of payments and remittances utilizing blockchain, so until then, interoperability with existing infrastructures (like SWIFT) is essential, but the ratio of blockchain utilization in this field will gradually increase."

Increasing Cases of Security Token Issuance in Japan: What Should Companies Consider?

The main session started with a presentation from Mr. Eiji Kobayashi, the Country Head of Securitize Japan. Securitize, founded in 2017, is one of the largest security token platforms in the world, known for tokenized funds like BlackRock's "BUIDL." Mr. Kobayashi introduced the global movements of Securitize as well as examples of token issuance in Japan, which are increasing, such as those from the Marui Group and Phillip Securities.

Regarding the increasing number of companies working on the issuance of security トークン, Kobayashi pointed out that "there is an advantage in that it can be used not only for finance but also for loyalty marketing." In response to this, questions such as, "On the corporate side, it's necessary to involve not only the fund-raising personnel but also the marketing personnel, but what is the reality?" were also raised from the audience.

In addition to this, there were questions regarding the issues faced by Japanese issuers in promoting the use of public chains, as well as the challenges in realizing the BUIDL worldview in Japan, and each was answered.

Important Aspects Beyond Regulatory Frameworks for RWA Tokens

Next, Ms. Kumi Umezu, a partner lawyer at Anderson Mori & Tomotsune, a foreign law joint venture, will take the stage. Ms. Umezu has extensive experience in participating in securities issuance projects in both domestic and international capital markets, and she broadly handles corporate legal affairs, including financial transactions such as real estate finance, project finance, and fundraising using security Tokens.

Mr. Umezu explained the definition of RWA Token, its relationship with cryptocurrency, and the regulations that may apply to RWA Tokens in a step-by-step manner. He also reported on the business benefits and actual use cases. One typical use case is the NFT representing the claim to the delivery of tangible assets (alcohol). It was introduced as a benefit that, while a liquor sales license is required for the sale of alcohol, it is possible to sell between individuals without a license since it involves the delivery of tangible assets.

In response to Mr. Umezu, who explained that it is necessary to think about what it means for RWA tokens to be transferred on the blockchain apart from the legal and regulatory aspects, the audience asked, "Can it be defended to a third party that ownership and claims are also transferred along with the transfer of NFTs? Questions such as these were asked.

In response, Mr. Umezu stated, "As long as it is constituted as a claim, a liquor sales license is not required," and further explained, "Whether the transfer of claims can be realized through the transfer of the Token on the blockchain is a point of discussion, but legally it is not possible at this stage."

Furthermore, Ms. Saori Nakai, Deputy Director of the Digital Strategy Department at Sumitomo Mitsui Banking Corporation / Sumitomo Mitsui Financial Group and a digital business expert, introduced the role of the Digital Strategy Department within the group and the group's past initiatives.

## What are the fundraising plans using Tokens based on corporate assets? What are the benefits and challenges of utilizing Tokens?

In the second half of the roundtable report, all participants were divided into six tables for discussion. They chose to discuss one of the two themes: "① Designing a fundraising plan using Japanese companies' assets as Tokens" or "② The benefits and challenges for companies in utilizing Tokens."

N.Avenue club is a membership-based community aimed at accelerating Japan's Web3 business through monthly "round table (study group)" events featuring guest speakers from Japan and abroad, as well as "gatherings" that promote interaction between member companies, related startups, and experts. The secretariat is calling for participation from corporate personnel and business professionals involved in or interested in Web3 business.

|Text: Kei Mizusawa | Edited by: CoinDesk JAPAN Editorial Team | Photo: Keisuke Tada