The value of digitized assets and its global impact

STOs and the digitization (also referred to as tokenization) of assets

  • Digitization adds value to legacy finance through: transparency, liquidity, and automation.
  • Innovation is rapidly developing at a global scale

The following post provides an update on the developing digital asset market. Why its important, and what kind of implications it has on the future of finance.

WHAT’S THE VALUE ADD?

Digitization makes bringing liquidity to illiquid markets possible, by creating blockchain based tokens called security tokens.

Security tokens can be referred to in 3 categories:

  • Traditional financial assets like stocks and bonds
  • Non-traditional financial assets like shares and revenue rights.
  • Non-traditional assets like real estate and art.

Acquiring fractional ownership of an illiquid asset such as a REIT or a VC fund is nearly impossible without buying security tokens. These assets are regulated securities and must remain compliant when ownership is transferred. Requiring an ongoing KYC/AML process throughout the token’s lifecycle. The buying and selling of security tokens must take place on a SEC registered as securities token exchange.

This is one of the reasons why the security token market has yet to reach expectations, the regulated infrastructure has yet to be established. Simply put, we’re still early.

Here’s a quote from Jeremy Allaire CEO of Circle:

“In my mind we are at the very beginning of a ‘Tokenisation of Everything’ where every form of asset, every form of value storage, every form of important record becomes a crypto token.”

GLOBAL INNOVATION

Global financial services are moving toward security tokens.

US

Bakkt was recently announced by the founder and chairman of the NYSE and is among the leaders of US tokenization innovation. Bakkt offers direct exposure to Bitcoin, through pre-funded contracts making it a backed investment vehicle.

According to Bakkts’ CEO Kelly Loeffler:

Bakkt is designed to serve as a scalable on-ramp for institutional, merchant, and consumer participation in digital assets by promoting greater efficiency, security, and utility.”

This on ramping of institutional investors, has massive implications for tokenized securities.

International

Malta has made significant moves within the space. The Maltese Stock Exchange (MSE) signed a memorandum of understanding (MOU) with Binance to set up a security token exchange. According to a press release shared with Cointelegraph September 11, the forthcoming trading platform is poised to benefit from the Malta Stock Exchange’s “26-year track record of operating as a regulated stock exchange”. Binance is the world’s largest cryptocurrency exchange by trading volume.

Binance CEO Changpeng Zhao, also known as CZ, is quoted as saying:

“Malta […] has become a global hub for blockchain technology through active and transparent crypto regulations. This partnership will allow Binance and MSX to host traditional financial assets on blockchain technology through security tokens.”

Switzerland’s principal stock exchange has announced that it is developing a blockchain-based platform to tokenize traditional securities.

Swiss Exchange SIX will SIX Digital Exchange (SDX), utilizing blockchain and its expertise in operating a large-scale financial infrastructure. SDX will create a marketplace where traditional investors can digitize their assets using blockchain.

Jos Dijsselhof, chief executive of SIX, said in the announcement:

“This is the beginning of a new era for capital markets infrastructures. For us it is abundantly clear that much of what is going on in the digital space is here to stay and will define the future of our industry. The financial industry now needs to bridge the gap between traditional financial services and digital communities.”

To sum it up, the developing digital asset market has implications on the future of finance.

I am the President of Birch Global Group Inc., at Birch we’re focused on the development and launch of our a debt crowdfunding platform.