Decentralized exchanges (DEXs) are trading platforms based on blockchain technology that operate without relying on centralized institutions. Typically, DEXs facilitate direct digital asset exchanges between parties through the use of smart contracts for automated matching and settlement. DEXs offer decentralization, anonymity, and enhanced security compared to traditional centralized exchanges, aligning with the core principles and advantages of blockchain technology.

However, due to the distinct trading mechanisms of DEXs and their decentralized nature, they face certain challenges and risks in terms of compliance. For instance, the absence of Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations may enable illicit funds to flow through DEXs, thereby endangering the stability of the entire financial system. Additionally, certain DEXs may also suffer from insufficient transaction transparency, vulnerabilities, and security issues.

To meet regulatory requirements, many DEXs have started implementing measures such as KYC authentication, enhanced security protocols, and the establishment of compliance frameworks. Moreover, several countries and regions have begun introducing regulations and policies to govern and supervise DEXs.

Overall, addressing the compliance issues of DEXs will require ongoing exploration and practical solutions encompassing various aspects, including technology and regulations.

DigiFT: A Decentralized Exchange Focusing on Asset-Backed Token Issuance and Trading

Founded in 2020, DigiFT is a decentralized digital asset exchange (DEX) that specializes in the issuance and trading of asset-backed tokens (STOs). DigiFT is the first and only DEX to enter the Monetary Authority of Singapore's (MAS) FinTech Regulatory Sandbox, which provides a supportive framework for innovative financial products and services. Through close collaboration with MAS, DigiFT ensures the smooth and secure operation of token issuance and trading.

DigiFT offers regulated decentralized financial solutions on the Ethereum blockchain, deploying an Automated Market Maker (AMM) mechanism to facilitate secondary market liquidity for security tokens backed by financial assets.

DigiFT's fintech breakthrough enables the compliant mapping of traditional financial assets onto the public Ethereum blockchain, allowing investors to directly hold and trade digital securities through wallets. As a result, DigiFT's exchange significantly enhances the availability of products in the capital markets and provides liquidity to previously illiquid assets.

DigiFT introduces a blockchain-based digital securities trading platform in the Web3 era, improving upon the inherent liquidity pool solutions of blockchain and expanding the forefront of the capital markets. By participating in this market, issuers can tokenize their assets, while investors have a variety of products to choose from.

In terms of the team, DigiFT is supported by renowned venture partners and is a global institution. Its founding team comprises professionals with extensive knowledge of blockchain technology, having previously developed digital asset exchanges and products at prominent firms such as Goldman Sachs, UBS, Citibank, and Morgan Stanley.

Project Features

DigiFT is deployed on the innovative Ethereum blockchain and offers several features for asset owners and issuers to comply with regulatory requirements, facilitate effective fundraising through security tokens, and provide secondary liquidity through AMM.

For asset owners and issuers, DigiFT provides compliant KYC/AML standards, allowing them to raise funds effectively using security tokens while ensuring regulatory compliance. Additionally, DigiFT offers secondary liquidity through the AMM mechanism.

For qualified and institutional investors, DigiFT grants access to blockchain-based investments, enabling trading with fiat token or USDC, and providing a range of trading options.

The project boasts the following notable features:

1.     Security Token Offerings (STOs)

Enables investment in asset-backed tokens using fiat currency, stablecoins, or cryptocurrencies.

2.     Automated Market Maker (AMM)

Ensures high trading liquidity without the need for centralized order books.

3.     Wallet-to-Wallet Transactions

Enables direct peer-to-peer transactions from users' digital wallets, eliminating intermediaries.

4.     Whitelisting

On-chain identification and trade monitoring mechanisms.

Subscription Process

1.     DigiFT Account Opening and User Verification

Subscription on DigiFT is open only to qualified investors and financial institutions. Qualified investors must meet at least one of the following criteria:

1)      Net worth > SGD 2,000,000

2)      Net financial assets > SGD 1,000,000

3)      Income in the past 12 months >= SGD 300,000

Personal assets can include holdings of BTC, WBTC, ETH, USDC, and USDT, but the value of BTC, WBTC, and ETH will be discounted by 50%, while USDC and USDT will be discounted by 10%.

2.     Register a Digital Wallet

Users need to register their digital wallet address during the subscription process and add it to the whitelist for subscription and trading purposes.

3.     Token Subscription and Allocation

1)      Investors subscribe to security tokens through the DigiFT platform.

2)      After the allocation process is complete, the security tokens are transferred to the investor's wallet.

4.     Token Listing and Trading

Trading Methods:

1)      Automated Market Maker (AMM)

2)      Over-the-Counter (OTC) trading

3)      Peer-to-Peer (P2P) trading

Financing Situation

On February 28, 2023, DigiFT announced the completion of a $10.5 million Pre-Series A financing round. The round was led by Shanda Group, a global private investment holding group founded by Chen Tianqiao and his family in 1999. Shanda Group focuses on four investment sectors: private equity (venture capital), public markets, real estate, and natural resources. Other investors in the round include:

1.     HashKey Capital, one of the most influential and largest crypto funds globally.

2.     Hash Global, a Web3 venture capital fund headquartered in Shanghai and Singapore.

3.     Xin Enterprise Pte. Ltd., a Singaporean investment company fully owned by Liang Xingjun, co-founder of Fosun Group.

4.     BeiTuo Capital, an industry capital firm with a focus on digital technology.

The funds raised in this round will be used to support regulatory license applications in Asia, the Middle East, and Europe, market expansion, technology development, and enhance the company's innovation capabilities.

Following the completion of this financing round, DigiFT's recruitment plans will be further accelerated to support rapid business growth. DigiFT will seek talent with expertise in both traditional finance and Web3, deploying them in Singapore and other regions targeted for DigiFT's expansion.

Conclusion

DigiFT is a decentralized digital asset exchange that focuses on asset-backed token issuance and trading. Through close collaboration with regulatory authorities, the platform has implemented a series of compliance measures to meet KYC/AML standards, ensuring the smooth operation of security token issuance and trading. By providing regulated decentralized financial solutions, DigiFT significantly enhances the availability of products in the capital markets and provides liquidity to previously illiquid assets. The successful financing round further demonstrates DigiFT's strength and market potential. In the future, DigiFT will continue to explore and practice in various areas such as technology and regulations, aiming to connect DeFi and TradFi in a compliant manner.