Swarm launches permissionless trading platform for tokenized real-world assets

Swarm, a Berlin-based DeFi platform regulated by BaFin in Germany, has launched a permissionless trading platform for tokenized real-world assets, called “Open dOTC,” as a public goods service.

The platform is built on Ethereum and uses decentralized over-the-counter (dOTC) smart contracts. These contracts are designed to eliminate slippage, ensure immediate settlement and minimize credit and counterparty risks by fully collateralizing transactions, a statement said.

Swarm’s tokenized US Treasury ETFs will be available at launch, with the platform planning to add tokenized publicly traded stocks such as Apple and Tesla.

“The adoption of tokenized assets has been hampered by a lack of viable platforms where they can be traded,” said Swarm co-founder Timo Lehe. “The launch of this public goods service means more people can benefit from the RWA story that has exploded in 2023.”

Built with MiCA clarity

Swarm said Open dOTC was built following MiCA clarity – the European Union’s Markets in Crypto Assets regulation – which came into effect in June. Applications that are sufficiently decentralized do not fall under the purview of regulators, Swarm claimed. However, European trade body the Association for Financial Markets in Europe warned in July against the exclusion of DeFi from MiCA, arguing it could open up opportunities for regulatory arbitrage.

The platform ensures that tokenized assets comply with EU prospectus regulations in Liechtenstein, and ensures that they are issued to and redeemed from wallets that have passed know-your-customer and anti-money laundering checks, Swarm explains. However, “The tokens can be freely transferred between wallets in the meantime and can be accessed by retail investors with no minimum investment amount,” the report said.

Swarm added that it will continue to operate its authorized platform for those who need a regulated DeFi trading infrastructure.

“Swarm has been in the regulatory process for three years, so we have been ahead of most players in the space,” Swarm co-founder Philipp Pieper added. “We know there is an entire crypto and DeFi ecosystem that believes in permissionless infrastructure and Open dOTC was designed with them in mind. So far, innovation has occurred in the largely unregulated space of DeFi, which regulated players are now benefiting from.”

Reducing the SMT supply

Trading fees on Open dOTC are set at 0.25% and are used to buy and burn Swarm’s Ethereum-based SMT tokens. These were previously used as payment for trading fee discounts and liquidity rewards on Swarm’s authorized and regulated platform.

Lehes said SMT token holders would benefit from trading activity on Open dOTC, “effectively making this a community-owned project.” However, any potential benefit would come from a reduction in SMT supply rather than from a formal community ownership or governance program, as the public goods service is not owned or controlled by anyone.