FQX, which is renaming Obligate, announced an initial $4 million extension round from new investors Blockchain Ventures and Circle Ventures, joining existing backers SIX Fintech Ventures and Earlybird. Brings the total for the round to $8.5 million.

The startup initially launched an eNote solution, a platform for issuing digital IOUs, on Swisscom’s Hyperledger Fabric blockchain infrastructure. Using that solution, it ran a pilot with Credit Suisse a year ago and partnered with SIX Digital Exchange (SDX) for trading, settlement and custody.

Now, with its Obligate rebrand, it is turning to the Polygon public blockchain, which is set to launch in February 2023 to support companies issuing tokenized commercial paper and on-chain bonds. It is not a lender. The platform facilitates the issuance so that the process is faster, simpler and cheaper. And it replaces the role of issuing and paying agent with smart contracts.

“Obligate is bringing new innovation to help bridge the worlds of traditional finance and DeFi,” said Wyatt Lonergan of Circle Ventures. “Through its platform, Obligate is adding utility and a compliant regulatory framework to the emerging real world asset (RWA) DeFi market.”

Regulation

The startup mentions that debt securities are ‘regulated’ and issued within a regulated environment. We think this means they are standard promissory notes. The notes are based on Delaware law (UETA) or Singapore law (ETA) and Swiss law for ledger-based securities.

In terms of the regulated environment, Swiss law supports DLT-based infrastructures and Polygon qualifies as a securities ledger as most public blockchains would, according to Obligate.

Despite being issued on a public blockchain, participants must go through a KYC and AML process. Obligate says it is a member of VQF, one of Switzerland’s Self-Regulatory Organizations (SROs) for AML. That being said, notes are bearer instruments. When the promissory note matures, the refund can only be made to someone who has gone through the Force KYC process. He is also a tied agent of a German regulated company.

Investment in the notes is not available to the general public and is restricted to ‘qualified investors’ and excludes some jurisdictions.

From the issuer’s point of view, the startup has partnered with Credora, web3’s credit rating firm.