Security tokens bring numerous benefits
Similar to traditional securities, security tokens represent ownership interests in an asset. They can represent ownership of:
- traditional assets, think publicly-traded equity, bonds, debt, etc., or
- traditionally illiquid assets, think private placements, real estate, artwork, intellectual property, synthetic asset baskets, etc.
At the same time, they are created digitally and use blockchains to structure and automate functioning.
Process efficiency
Through the use of security tokens, legacy middlemen can be removed to save costs. In addition, efficient fundraising and trading, reduced settlement times, as well as improved processes of dividend issuance, voting capabilities, and liquidation preferences lead to greater efficiency. The tokenised cap table reduces overhead, administrative work, and general transfer time. These gains in efficiencies can be, and are, passed on to the issuer and investor of the token.
Market availability
Investors have the opportunity to diversify their portfolio as they gain access to previously unavailable or traditionally-illiquid assets. In addition, a perfect digital record of ownership and of all transactions is maintained at any time. This increased transparency protects investors and mitigates actions of foul play, such as the back-dating of documents.
Portfolio diversification
Investors have the opportunity to diversify their portfolio as they gain access to previously unavailable or traditionally-illiquid assets. In addition, a perfect digital record of ownership and of all transactions is maintained at any time. This increased transparency protects investors and mitigates actions of foul play, such as the back-dating of documents.
Automation
Overall automation, as in the case of automated compliance and payments, is another benefit of security tokens. Jurisdictional regulations can be enforced by being built-in and customised into each security token's configuration. The same applies for automated payments, for example in the case of dividends.
