Drawbridge compliance software could be a key catalyst for DigitalX
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DigitalX has recently launched its Drawbridge compliance software for the ASX’s new distributed ledger technology system.
Listed in 2014, DigitalX (ASX:DCC) was the one of the first publicly traded companies anywhere on the globe to get into crypto, with its Bitcoin mining operation.
Now DigitalX is trying to gain first-mover advantage with another blockchain-related technology, a new compliance tool it’s calling Drawbridge.
“We’ve gone down a path of looking at how we can be a first mover in this space, by building applications on the ASX’s distributed ledger technology (DLT) or blockchain system,” says DigitalX Chief Product Officer David Beros.
“As a listed company we’ve been able to use ourselves as a bit of a guinea pig to test new ideas, on the assumption that a large proportion ASX DLT users will be other listed companies .”
Right now, Drawbridge is focused on reducing reputational risks to companies by helping them enforce insider trader policies.
DigitalX had a near-miss on this front itself, when a junior staff member unknowingly went to trade DCC securities the day before a quarterly report was due to be released.
All companies are required to have rules against insider trading, but many times all that consists of is an emailed or a scanned document.
“As a result, things do frequently go wrong,” Beros says. “Usually its not on the scale of severe insider trading, but more a simple a lack of awareness, where an employee might trade a day before an announcement, or they’re unclear on the trading rules.”
Drawbridge right now consists of an app that employees can use to let them know when trading in their company shares is allowed.
“We currently have several listed companies using the app for their director and employee trading, it’s a small but growing number that gives us good validation that there is a market for this today, and it’s a glimpse of the future in terms of interacting with blockchain-based applications,” Beros said.
DigitalX last month acquired Sell My Shares for $1.64 million in cash, an acquisition that will let the Perth-based company offer Drawbridge users the option to execute trades once they’ve been approved. For compliance managers, that means they’ll have visibility on matching trade approvals with trade executions via a trade dashboard.
“That’s where we’re headed for in terms of our commercialisation strategy, where we’ll monetise from share trading fees, rather than relying purely on a software as a service type model,” Beros says.
But ultimately DigitalX sees Drawbridge as something much bigger – the governance standard for the world’s 630,000 publicly listed companies.
It’s one of the first third-party applications that the ASX has chosen for tests on its DAML blockchain-based replacement for CHESS, the bourse’s aging mainframe-based system for share trading.
DAML (Digital Asset Modelling Language) is set to go live in April and is expected to be transformative for the sharemarket.
DigitalX sees it as the equivalent of Open Banking for the Australian share market, opening up access to share registry data and creating many opportunities for regtech and fintech applications.
The ASX is developing the platform in conjunction with a US company called Digital Asset, which is also working with Hong Kong Exchanges, Clearing and Nasdaq. Ultimately disparate data silos could become part of a synchronised network spanning the globe, the company says.
This article was developed in collaboration with DigitalX, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.