We are in the next financial services revolution. Digitization and Distributed Ledger Technology is combining to create new value and opportunities for a more efficient global marketplace for investment opportunities which will impact many sectors and market participants.
The ‘tokenization of securities’ is an important next step for the Token Economy and wider financial markets.
The tokenization of a security or asset, is a process to allow potentially faster, cheaper and more programmable formats of the underlying asset or instrument to be transferable between eligible parties within a ‘digital wrapper’.
The benefits will vary between different use-cases (debt, equity, fractional ownership of assets etc.) and will evolve over time. However benefits cited include broader and cheaper access to larger global pools of capital for issuers - lower fees, faster deal execution, enhanced international market exposure, accessing a larger potential investor base, enabling automated service functions and a reduced role for middlemen and a reduction in the potential for financial institution manipulation. It is also a potentially more ‘programmable’ form of ownership and over time we expect to see enhancements to existing instruments and investment models as well as innovation in what is offered to investors, in tokenized form.
Tokenization or ‘doing’ an STO does not turn an ugly duckling into a swan. Put another way, ‘tokenization’ in and of itself does not turn create substantial new value where none existed before.
Undertaking an STO without legal, technology and investment advisors who are coordinated in the delivery of the process is unlikely to succeed. In short: