The Canadian Securities Exchange is planning to launch a blockchain-powered platform to clear and settle securities trades, challenging the monopoly long held by TMX Group Inc. and its own ambitions with the technology.

This new clearing house, which requires approval from Canadian regulators, would allow companies to issue conventional equity and debt using a digital token representing a share in a business, also known as a tokenized security.

The CSE said using blockchain, best known for powering the underlying technology behind Bitcoin, will allow securities trades to be confirmed in real-time rather than two full business days for settlement under conventional systems, and reduce errors.

The traditional process used to settle accounts and clear trades is “slow, high and archaic cost,” said the CSE’s chief executive Richard Carleton, particularly compared to the other instant financial transaction systems used today, such as digital payments.

“We have the opportunity here to start from scratch with issuers that are prepared to basically bypass the traditional paper-stock-certificate system and move to these equity securities tokens,” he said in an interview.

This clearing house, if approved, would serve as a rival to Canadian Depository for Securities Ltd., which has long served as the country’s main securities and fixed income clearing and settlement hub.

CDS is owned by the TMX Group, Canada’s biggest exchange operator that operates both the Toronto Stock Exchange and the TSX Venture.

In October, the TMX Group announced it was collaborating with the Bank of Canada and Payments Canada to experiment with using blockchain technology to automate the securities settlement process. This project to develop a proof of concept for clearing and settling securities marked the third phase of the Canadian central bank’s Project Jasper looking at how digital ledger technology could transform payments in Canada.

The prototype for a digital ledger-based clearing system is in the process of being built, and testing could begin as early as the second quarter, said John Lee, TMX’s managing director of enterprise innovation product development.

“It would change the model completely, because it would allow you to immediately settle securities against a cash leg, almost instantaneously,” he said.

When testing is complete, the TMX group will decide to move forward based upon whether the possible benefits of utilizing a blockchain-based system outweigh the downsides, he included.

The CSE’s statement likewise comes less than a week after the CDS said it would not prohibit the clearing of securities of marijuana business with activity in the U.S.– where marijuana is legal in some states but stays unlawful under federal law– and rely on exchanges to review the conduct of noted providers.

CDS’s announcement and a different statement from its umbrella company brought clarity months after it was initially reported that the TMX was thinking about such a ban.

The CDS’s clarification was especially pertinent for the CSE, which has actually gained from a surge of cannabis-related listings. Cannabis business have largely dealt with the hazy legality by listing on the smaller, less risk averse exchange.

Carleton stated the CSE anticipates to be the first recognized exchange in Canada to introduce a fully-developed blockchain platform for trading, cleaning and settling tokenized securities. It has actually certified the innovation from New York-based Fundamental Interactions Inc

. Carleton included the CSE will be submitting an application in conjunction with its blockchain-powered cleaning house to the suitable provincial securities commissions throughout the nation.

Among the questions that has to be addressed, in conjunction with regulators and industry, is whether providers on other exchanges would be able to utilize the CSE’s blockchain-powered clearing home, he stated.

“Certainly, that is a place that we want to get to,” he said.

He noted that it will be a “material effort” for older recognized companies that have long used the standard paper stock certificate system to transform to a modern platform.

“This is the direction that clearing is going to take around the world,” he said. “But, the first takeup will be from new issuers.”

Through the CSE’s new platform, securities would be used to investors through tokenized securities.

The CSE has already signed a memorandum of comprehending with Vancouver-based 3D printing company Kabuni Technologies, which prepares to file a prospectus with the British Columbia Securities Commission to provide tokenized securities to investors.