HKEX Former CEO Launches Micro Connect, New Blockchain Asset Exchange – Ledger Insights
This weekend saw the launch in Macau of the Micro Connect Financial Assets Exchange (MCEX), a blockchain-powered exchange founded by Charles Li, former CEO of HKEX, and backed by the venture arm of the Agricultural Bank of China and Li Ka-shing’s Horizons Ventures. Using a new digital resource, Micro Connect provides financing to Chinese micro and small businesses, especially consumer businesses such as restaurants, shops and sports clubs.
A Daily Revenue Obligations (DRO) represents rights to income from SMEs, with funding repaid through the daily tracked income via point of sale (POS) solutions and bank data. Therefore, there is considerable transparency about the performance of the DROs. Investments in these small firms began long before the launch of the exchange, with funding of more than $120 million for 2,900 stores across 200 brands. The last point highlights that the fast path to rollout is to target brands rather than individual businesses.
Blockchain is used for trading, settlement and clearing of DROs.
“This is the world’s first financial market dedicated to the micro-economy of China through an innovative new asset class, DRO,” said Charles Li, founder and chairman of Micro Connect. “We look forward to Micro Connect’s contribution to connecting China’s micro and small businesses with global capital.”
MCEX does not rely on funders that directly invest in DROs. Instead, it also launches structured products and funds. DROs can be merged in the same way as securities (ABS), with senior and junior tranches. In addition, the founders have planned Daily Revenue Funds, which also invest in DROs.
A year ago, Micro Connect raised a $70 million Series B funding round, bringing its total funds raised to $120 million. The funding included existing investor Sequoia China and new investors such as ABC International (Agricultural Bank of China), Adrian Cheng, Ausvic Capital, Chuang’s Capital, Dara Holdings, Li Ka-shing’s Horizons Ventures, Keywise ARCHina Fund, Lenovo Capital, Vectr Fintech, and others . In December, HSBC advanced a loan facility of USD 25 million.
It is certainly a great idea. Understandably, the White Paper emphasized the opportunity, which seems significant, as opposed to the risk. This seems to be if people find ways to game the system by bypassing the tracking. Or if there is an economic downturn resulting in lower daily income. Presumably this means that repayment will take longer, but that was not made clear in the white paper. Another potential risk is if data is manipulated between being delivered by POS systems and being entered on the blockchain. But with transparency it should be discoverable.
