Advantages of the Digital Securities Market For Investors and Issuers
By: Kirill Bensonoff
>> This article is for informational purposes only and is not financial advice. The information does not constitute investment advice or an offer to invest.
The securities market has existed for a long time, originally as a traditional, paper-based system. Since then, digital securities have been developed as a new way of managing a core part of the global economy in a new and exciting way. Digital or tokenized securities are a new type of ownership facilitated by smart contracts and applied to a variety of purposes such as equities, real estate, debt and other asset classes. There are many distinct benefits of getting involved in the digital securities sector, for original crypto investors to non-crypto investors and even issuers; everyone stands to benefit from the transformation of this asset class. Investors are increasingly interested in alternative asset offerings in order to both diversify and broaden their investment portfolios.
According to the Kepler Finance database, more than $640 million has been invested in companies that are developing the technology that aims to mainstream the digitization of assets and securities so far, a drop in the bucket of potential still to come.
These are the advantages of digital securities investing for both investors and issuers:
Benefits for Crypto Investors
There are two classes of investors that typically will invest in blockchain-based vehicles: those investors who are currently in cryptocurrencies and altcoins, and those who are not. Crypto holders have been found to be more likely to be presented with an opportunity to diversify as digital securities come to market, and to be open to new offerings.
The reason for this is simple. Seasoned cryptocurrency investors are realizing the potential of an industry using similar technologies but which are still working within regulatory guidelines. But this is far from the only advantage- with digital securities, crypto investors can benefit from moving their gains into asset-backed offerings within a regulated environment, with more secure holdings.
By investing into digital securities, cryptocurrency investors will also retain all the benefits of blockchain technology, but with more investor protection.
Benefits for Non-Crypto Investors
Non-cryptocurrency investors also stand to benefit from investing into digital securities.
These investors benefit from gaining access to pre-vetted and regulated digitized assets which previously would only have been available through cryptocurrency-based or blockchain offerings.
But for people just getting into blockchain, things get even better. They are able to get in early with funds and infrastructure development at the “picks and shovels” level, which may bring additional returns based on growing adoption and interoperability in the foreseeable future. For these investors, greater liquidity of previously illiquid assets such as real estate will be a reality sooner rather than later, and offer unique potential for asset investment and management. Once asset management is digitized, investors will have access to markets and exchanges for trading, 24/7, with no downtime.
Benefits For Issuers
Investors aren’t the only party standing to benefit from digital securities. The issuers of these securities will be able to code compliance requirements into their offerings, making regulations and audits more efficient and transparent than ever before. At the same time, the overall process of capital formation is streamlined by digitization, and issuers of digital securities are able to collect funding via both fiat and crypto markets from an investor pool with no borders, accessing people around the world. The management of these global securities is also improved, with the dispersal of shares being done digitally, integrating the transparency benefits of blockchain into global investments. In short, the makeup of the securities hasn’t changed; what has changed is the management and ownership of these securities.
Issuers will also play an important role for the digital securities market. High quality issuers will create the push needed to draw investors to the digital security market. Demand for access to digital asset-based funds both locally and internationally has increased significantly, but it is imperative that these initial offerings are pre-vetted.
While the traditional securities market will continue to exist, investors and issuers can gain various advantages from digital securities. Digital security offerings will provide companies with a new way of introducing blockchain and tokenization to their businesses. Digital securities are making for better efficiency and compliance for all parties.
About the author:
Kirill Bensonoff is a serial entrepreneur with multi-million dollar exits in the technology industry. He has focused on building technology focused startups in the fintech, blockchain and enterprise IT verticals. As a graduate from the EO Entrepreneurial Masters at MIT, he has served as both an advisor and angel investor to over 30 different companies. Kirill has been published or quoted in national business and technology media, including Forbes, Inc., Huffington Post, Bitcoin Magazine, CoinTelegraph, The Street, Crowdfund Insider, Investing, Crypto Daily, Cointelligence, and Securities, among many others. Kirill is the chief product officer for the fintech-driven solutions offered by New Silver, a non-bank loan originator for real estate entrepreneurs; the host of The Exchange With KB podcast, a founding member of the Chain Reaction blockchain angel group, and he also runs the Blockchain+AI investment syndicate.
Disclaimer: Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. This article is for informational purposes only, and is not financial advice. The information does not constitute investment advice or an offer to invest.
