Asia Is Driving The Adoption Of Security Tokens

Dynamic opportunities within a dynamic region.

Asia is the powerhouse that everybody is watching in the Security Token market. With over half the world’s population it holds the human and natural resources that could change the way we interact with financial products. As the region grows and develops it is swiftly adopting the latest technological advancements and the potential is significant.

Security tokens are the next big step for Asian financial markets. Their implementation in the region will influence the adoption of security tokens across the rest of the world. In this article, we set the stage for future discussions on the adoption of security tokens in Asia and their potential socioeconomic impacts.

4.5 billion people live across the Asian region, which is more than 60% of our global population. The 49 countries in Asia represent the world’s swiftest growing economic region and the biggest continental economy. We have seen some of the longest global economic booms in Asia and there was a period when economists spoke with respect about the region’s Tiger and Tiger Cub economies. It is predicted that in the near future 90% of new members to the middle class will come from Asia. These facts are setting the stage for the adoption of security tokens across the region.

The birth of Bitcoin and other cryptocurrencies heralded a watershed in the structure of global finance. Cryptocurrencies have a number of significant advantages over our traditional fiat currencies. They can be easily transferred around the world, are hosted on decentralized blockchains and are cryptographically secured.

Security tokens are cryptographic versions of traditional securities but hosted on a blockchain. They can represent stock in a company, ownership rights or in the case of MetalStream’s MSGLD 1 gram of LBMA certified gold. They have advantages over traditional securities as they can be continuously and globally traded, do not require brokers and unlike cryptocurrencies can be returned to the owner’s wallet in the event of theft or loss. Equally important is the fact that security tokens can be fractionalized.

We have previously discussed how Asian central banks are implementing blockchain into their existing payment systems. To provide perspective on where the broader market for security tokens is heading in Asia it is instructive to refer to a recent report by HSBC bank.

HSBC identifies that security tokens have the potential to democratize investment opportunities. They point out that 0.9% of the world’s population controls 43.9% of global wealth. This astounding imbalance could partially be addressed by the tokenization of assets. By 2027 The World Economic Forum has estimated that tokenized markets could be worth USD $24 trillion. An economic situation is coming into focus where technology is enabling greater numbers of society to participate in this enormous market.

Investing in securities such as stocks and bonds can generate significant returns but has traditionally been the preserve of the wealthy. Tokenization is about to change that. Traditional securities cannot be divided into smaller units but this can easily be achieved with security tokens. This fractionalization of assets will allow greater numbers of people to participate in capital markets for the first time.

A knock-on effect of this financial democracy could be greater incentivisation for corporate responsibly. When the majority of investments are made by the affluent there is little incentive for corporations to operate in a socially equitable manner. In the future, we may see significant investment capital available from the less affluent who will choose to support corporations that do not participate in socially or environmentally degrading activities. Society voting with its wallet may be the catalyst that’s needed to drive corporations to behave with greater care.

The Asian market will create some of the largest synergies between population and technology for security tokens. As new exchanges and implementations for the technology emerge in the region, it will drive growth that could change the way we see capital markets. It is these changes and opportunities that we will be discussing in future articles.

Sonata Capital is registered in the Labuan International Business & Financial Centre, and invests in companies successfully exploiting the vast opportunities of the digital economy.

100% of the equity in our funds have been tokenised, and will be listed on digital securities exchanges in Labuan and elsewhere. The equity of Sonata Capital Ltd (LL16076) has also been tokenised, and the rights to the equity is represented by the SONATA Security Token issued on the Ethereum network.

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