Fusang Exchange (Fusang), a digital stock exchange operator, has listed the world’s first institutional tokenised sukuk backed by a sovereign-linked instrument today (Oct 30).
The operator said the successful tokenisation and listing of a digital sukuk representing the corresponding underlying sukuk issued by International Islamic Liquidity Management Corporation (IILM).
“This tokenisation exercise is the world’s first digitisation of an institutionally-issued sukuk and is expected to revolutionise the Islamic investment landscape by providing investors access to shariah-compliant high-quality liquid assets (HQLA),” it said in a statement today.
IILM is an international organisation established to address liquidity management challenges faced by Islamic financial institutions globally and acts as the programme administrator of the underlying sukuk.
The tokenisation and listing exercise was completely led by Fusang, utilising 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),” the operator said.
Zico Shariah Advisory Services acted as the Shariah adviser for the issuance of these ERC-20 compliant tokens, the most popular Ethereum standard for token issuance.
It added that the listing opens up access to a short-term A-1 rated sukuk for global institutions and their clients.
Fusang chief executive officer Henry Chong said their next-generation tokenisation technology and standardised legal framework has created the world’s first 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 tokenised assets through a fully-regulated ecosystem,” he said.
Chong said Fusang is encouraged by the government’s commitment to developing the Islamic financial market, as evidenced by announcements in Budget 2024 – which aligns with Fusang’s aim to revolutionise Islamic financial markets via digital initiatives.
“The future of Islamic finance has arrived and it’s digital, inclusive and borderless,” Chong added.
Fusang president Kelvin Ung said Fusang gives banks and brokers access to institutional Islamic investment products and greater global market distribution.
“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 tokenised securities backed by government-linked assets. Global banks and brokers can now access these tokenised securities via Fusang ,” he added.
Labuan Financial Services Authority director-general Nik Mohamed Nik Musa said the authority is excited to see emerging technologies harnessed within a regulated environment, driving innovation in Islamic finance.
“We envisage the new guidelines on Labuan Securities token offering would further spur the development of tokenised securities in Labuan.
“Leveraging on Labuan IBFC’s robust regulatory environment, Fusang’s innovation has provided the platform for listing of a unique tokenised structure cementing Malaysia’s leadership role in Islamic digital financial services.
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 is a member-only network of regulated financial institutions, which mirrors the operating structure of other non-digital stock exchanges.
The operator facilitates the tokenisation, listing, trading, settlement, and custody of digital securities, all backed by real-world assets and is being regulated supervised by the Labuan Financial Services Authority, under Finance Ministry.
