Ant digital arm puts 60 billion yuan energy assets on its blockchain

[HONG KONG] A unit of Ant Group is quietly making inroads to link over 60 billion yuan (S$8.4 billion) worth of energy infrastructure and other real-world power assets to its blockchain, according to sources familiar with the matter.

Ant Digital Technologies, the enterprise solutions arm of the Jack Ma-backed fintech giant, has been tracking the power output and potential outages of some 15 million new energy devices, including wind turbines and solar panels in China, and uploading the data to its blockchain, which is known as AntChain.

The next step is to issue tokens linked to those assets, and some of that has already begun. The firm has so far completed financing for three clean energy projects using this approach, raising about 300 million yuan in total for the companies that operate them.

Tokenisation of real-world assets is still at an early stage. “When you tokenise stuff, there’s trust involved; we need to know as a token holder that the company actually has the so-called collateral,” said Campbell R Harvey, a professor of finance at Duke University. The development can “be a good thing because once it’s tokenised, then we can do transactions very efficiently, quickly at low cost”.

One of Ant Digital’s options for future expansion is putting tokens on decentralised exchanges offshore to create more liquidity for the assets, according to the sources familiar with the matter, who asked not to be named because the information is private. The plans are still under deliberation and are largely dependent on regulatory approval, the sources added.

Financing deals

In August last year, Ant Digital pulled in 100 million yuan from offshore banks for Shenzhen-listed Longshine Technology Group, a new energy company. More than 9,000 of the firm’s electric charging units were linked with Ant Digital’s blockchain.

Separately, the unit raised more than 200 million yuan in December for GCL Energy Technology, a green energy service provider, from offshore investors by connecting the firm’s photovoltaic assets to AntChain.

When companies raise capital through the tokenisation of real-world assets, such as solar panels or battery systems, they can bypass traditional financial intermediaries. Instead of relying on brokers or centralised exchanges, they can issue digital tokens directly to investors that represent fractional ownership or future revenue streams from these assets.

Such an approach cuts out layers of middlemen, including loan officers, underwriters and asset managers, reducing costs and speeding up access to funding. It also potentially opens the door to a broader pool of investors, including retail participants, who might otherwise be excluded from infrastructure financing.

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Ant Group did not respond to emailed requests for comment.

Ant Digital invested in a public blockchain called Pharos Network Technology, whose chief executive officer is a former Ant employee, according to a statement last week. It also entered into a strategic cooperation agreement with Hong Kong financial services firm Yunfeng Financial Group, and the two will leverage Pharos’s platform to explore areas including real-world asset tokenisation.

Regulatory regimes

Much of Ant Digital’s progress will be dependent on Hong Kong’s regulatory regime for digital assets. A new set of rules governing stablecoin issuers in the city took effect in August. The Hong Kong Monetary Authority (HKMA) is now supervising the issuance of stablecoins designed to match the price of the Hong Kong dollar. The city’s de facto central bank plans to grant the first batch of approvals early next year.

Ant Digital is also contributing to a HKMA-led sandbox aimed at promoting the use of blockchains to tokenise real-world assets.

Ant needs to tread carefully in the space. While Hong Kong has been supportive of such initiatives, mainland China has a blanket ban on crypto-related transactions.

China told local brokers and other bodies in recent months to stop publishing research or holding seminars to promote stablecoins, seeking to rein in the asset class to avoid instability. Part of the move stemmed from concerns that the cryptocurrencies could be exploited as a new tool for fraudulent activities in mainland China, sources familiar said in August.

Blockchain and tokenising assets only contributes a small proportion of Ant Digital’s revenue, and the unit makes most of its income selling enterprise technology solutions, including in privacy and security to companies, the sources said. The unit’s revenue has not been disclosed before.

Ant Digital is not the only unit exploring how to apply blockchain technology for financial usage. Ant International has been leveraging similar infrastructure for cross-border corporate payments. The global arm is also applying for stablecoin-related licenses.

Ant Group made an estimated US$654.5 million in profit for the three months ended Mar 31. The Hangzhou-based company operates the highly popular Chinese digital payments and financial services app network Alipay, and has revamped its business model and strategy over the past few years. BLOOMBERG