The world has slowly started realizing the benefits of tokens and is slowly adopting in its various walks of life. But one industry that is yet to get “tokenized” is that of investment and finance. Even though there have been some attempts to tokenize securities, the general acceptance will still take time to come in. But as the things are placed today, it looks like Security Tokens could hold the future for the world of Finance and Investments.
Security Tokens: Tokenizing Tradition Securities
A couple of years ago token and its benefits were completely unheard of. But as the markets begin to mature and the world started getting more aware of the positives of tokenization. A lot of stakeholders including regulators and investors begin their trials to define and develop a use case of tokens. The Swiss financial regulator FINMA was one of the first to put a definition these and divided them into 3 types based on their function and use case. This included
- Payment Tokens (like bitcoin)
- Utility Tokens (like Filecoin)
- Asset Tokens / Security Tokens (like tokens that represent a share in a company)
While other tokens did have their own ways of disrupting the industry, people started looking at security tokens a solution rather than a disruption. Security Tokens just like securities could be subjected to regulation and were not designed as a way to circumvent existing regulations. While being regulated, these tokens provided amazing benefits for investors as well as issuers. Some of the benefits included
No Middleman: One of the main advantages of a security token that was sighted was that of removal the middleman from investment transactions. Typically, to buy a security, an investor needs a middleman which could be a broker, a bank, or some type of financial institution. With a security token, however, a business could sell, say, a share of itself without the need for a middleman.
