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The Benefits of Blockchain Technology for the Securities Markets

Blockchain Technology for the Securities Markets

by johnmichae1

As Bitcoin’s price has decreased by around 75% from its high, much of the interest that the blockchain and cryptocurrency markets attracted in 2017 and 2018 has diminished. Securitized tokens are one part of the market that is becoming more popular despite the overall unfavourable sentiment.

Instead than referring to a bundle of assets (or tokens) to be sold as securities, as some of us with financial knowledge may intuitively deduce, the term “securitized” in this context means converting blockchain tokens into legally acceptable securities.

All equities that are traded publicly are worth somewhere about $300 trillion. Privately traded stocks, other securities, such as bonds (which are worth more than stocks) and derivatives, are not included in that measurement. Using the opposite terminology, the tokenization of securities business has the the potential to be quite profitable.

The question of why someone would want their stocks tokenized remains. The reasoning seems to run against many of the ideals upheld in the cryptosphere, where libertarian notions of abolishing central banks and reducing the influence of the state in the financial markets are popular. Tokenizing securities makes sense from a self-regulatory standpoint.

Smart contracts made possible by blockchain technology can be used to stop regular investors from buying tokenized securitizations that they are not authorised to possess. They can take into account adherence to intricate, global know-your-customer (KYC) and anti-money-laundering (AML) regulations.

Therefore, with their approval, the technology that at times seemed to confound securities regulators might now be utilised to assist safeguard investors by enforcing securities laws.

Securrency, a 100-person firm that is focused on securitized tokens and has already received more than $9 million, was founded by Dan Doney, 48, who also serves as its CEO and CTO.

He joined me to talk about the work his company has done in the area. You may watch it in the article’s header video.

Doney is dedicated to making the world a better place through his technologies. “Security’s purpose is to deploy a worldwide, unified financial services infrastructure that drives capital creation out to the margins of the global economy, lowers the cost of participation in the capital markets, and improves global liquidity,” according to the website.

According to Doney, security tokens have the ability to solve two issues with the securities markets.

With our user-friendly, effective automated investment banking services, we significantly lower the cost to access the capital markets, he claims.

Securrency is not now an investment bank and has no plans to become one. It is actually a technological platform used by investment institutions.

Second, by supporting the financial services infrastructure of the future and acting as the global unifying protocol, focusing upon compliance, security, and universal interoperability, we stimulate and significantly boost global liquidity.

Because the technology solves the problems of monitoring the ownership even of fractional interests and by prohibiting anyone who shouldn’t from possessing the security token, one fundamental tenet of the technology is that assets that have historically been illiquid might become tradable.

The technology is used in QuantmRE Network’s product, according to creator and CEO Matthew Sullivan. Early on, he realised that he would require the tools that Securrency provides, but at first, he had trouble locating anyone who possessed the whole set of tools. In April 2018, his company made its first discovery of Securrency.

“Security offers a vital technical element on QuantmRE’s offering,” adds Sullivan. “We are able to govern the distribution of our asset-backed tokens by delivering an off-chain validation service.”

We may use Securrency’s technology to issue securities tokens, track ownership changes down to a fractional level, and determine a prospective investor’s KYC and AML status.

Security is one of the few technological companies that has implemented a platform that offers the answers that these new industries require, he continues.

Regulation Crowdfunding, which was introduced in 2016, is a significant new area of securities law. In accordance with the new regulations that permit the sale of securities to regular investors, Securrency is working on a partnership to enable reasonable offers.

Sullivan told me about something he had noticed. Blockchain is the most likely foundation technology that would be employed if one were to restructure how securities transactions are initiated and resolved.

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