Basics: What Are Security Tokens?
Now that everyone’s been talking about cryptocurrencies and banks like Fidelity are setting up their new offerings, a new kind of digital asset is the next significant development on the scene: security tokens.
To understand security tokens better, we need to realise that cryptocurrencies aren’t securities. They’re “utility tokens,” digital assets rather than physical ones. Security tokens, on the other hand, represent a share of the value of a real-life asset. Like cryptocurrencies, they’re blockchain-based, but they are genuine securities.
Liquid, Responsive Securities
Those who have been looking forward to better blockchain-based investment opportunities will welcome security tokens. With assets like real estate to back them, the tokens will have a comparatively stable and predictable value — but you’ll still be able to trade them as quickly as you do other digital tokens. At least, that’s the vision, but securities are much more heavily regulated than cryptocurrencies. Nevertheless, security token supporters say that the way in which securities should be handled is already defined in law and that this will make it easy for the new tokens to be compliant.
Swiss Stock Exchange Ready to Adopt Security Token Trading
It’s not just cryptocurrency enthusiasts who are welcoming the new kind of token. The Swiss Stock Exchange is already gearing itself to welcome trade in the new tokens. It plans to create a regulated exchange for security tokens. According to the Swiss, the SIX Digital Exchange will apply the same regulations to trading with security tokens as it applies to regular securities trading.
Many analysts believe that security tokens will ultimately become an essential part of the way we invest and trade in securities. After all, it would be entirely feasible to tokenise most assets, and with SIX getting a head start on security token trading besides having the regulatory environment to back it up, it seems likely that it will retain the lead in the tokenised trading environment.
Getting Securities onto Blockchain
To get securities onto blockchain, you first need to create a security token. STOXCHANGE.io operates from Finland and will launch Scandinavia’s first security token offering platform. And many more are coming to build up the market: Polymath plans to be among the front-runners here, and its platform is already enabling the conversion of securities into cryptocurrency-backed securities tokens. Polymath says it will build compliance into security tokens, but with securities and security tokens being subject to much more stringent regulation than utility tokens, it will be navigating a complex regulatory environment.
Destined to Gain Momentum
Security tokens seem set to gain momentum. The logic is there. Value can be divided into a series of tokens that can be freely traded anywhere in the world — the potential opportunities to raise funds and grow investments seem endless. However, as with cryptocurrencies, local regulation will determine how much of a mainstream trading instrument security tokens will be.
Having said that, the very fact that security tokens are tied to assets with a measurable value will make them attractive as a trading instrument. Despite the additional regulatory burden currently involved in their creation, security tokens show promise as the agile future of investment.
Investments as diverse as venture capital investment, art, luxury cars, property, precious metals and sports teams are already being touted as fertile ground for security token trading. There are those who doubt whether security tokens will rise beyond the current mainstream in the long run. Critics say that since security tokens will be in for intense competition, only a few projects would be able to generate enough support to make an offering viable. Advocates, on the other hand, see security tokens as a form of trading, fundraising, and investment equivalent to stock exchange trading but without the barriers and believe that it will open up the world’s markets to free trade as never before.
Security Tokens: A Topic to Watch
Security tokens are a hot topic and, regardless of any individual opinion on their future, they will be making waves. It might just be that secure, asset-backed, blockchain-based investment becomes the norm in the investment landscape of the future. Meanwhile, security tokens will be a rapidly-evolving that will be followed with interest by techies, financial wizards, and cryptocurrency experts alike.
Read more about STOXCHANGE at www.stoxchange.io
