Anthony Pompliano published the official guide to tokenized securities giving the world an introduction to the intersection of Blockchain and traditional finance. If you haven’t read it yet, stop reading this and go here before continuing.
Think of security tokens as the ability to purchase, trade, and sell digital ownership in asset classes that are currently illiquid like venture capital and real estate. Tokenized securities will create a global free market that will connect global investors with assets around the world. The tokenization of securities will have the most significant impact on US assets that currently lack access to free markets.
Wealthy global investors have invested in US-based assets for years to diversify their holdings and hedge currency risk. This diversification is most apparent in real estate. Chinese citizens invested approximately $153M in the US real estate market from March 2016 to March 2017. The majority of these homes and apartments sit uninhabited. Instead of apartments and homes, investors may consider iconic US real estate assets that decide to tokenize.
Security tokens will make investing in all asset classes more accessible and increase liquidity in markets that have high barriers to entry. There will be a reduction of the long lockup periods and high minimums that traditionally accompany venture capital funds. LP interests will be represented by a token which will be tradable on exchanges. Investors with significantly less investable dollars and a shorter investment time horizons will be able to participate in these markets.
Security token issuers understand the global demand for US assets and will raise the majority of their funds from countries like South Korea, Japan, China, and Singapore. The result will be a surge of global investment in the US. Liquidity premiums found in illiquid assets will flow to token holders. The increased demand will increase the price of the underlying assets.
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