Athena Blockchain recently published a detailed article on how private placements have much to gain from tokenized securities since they will increase liquidity across the board.
Raising capital is a necessity in the financial world. Sales of securities are no exception: most if not every sale of securities involves a private placement, or a capital raising event to a select group of investors. These investors can be firms, mutual funds, investment banks, or individuals. Different from a public issuance, a private placement is all about that first round of funding that is crucial for projects to get off the ground and running.
Athena Blockchain recently published an article How Tokenized Private Placements of Securities and the Development of Markets will Create Trading Liquidity and Enhance Demand precisely on how the cryptocurrency sector can accelerate this funding process.
The firm itself is no stranger to the security token sector; their CEO in October has been quoted as saying that it is his belief that “tokenized securities will someday replace stock certificates.”
Understanding the Stakes
Although we often speak of blockchain technology as providing the foundation for an open network, tokenization brings so much more to the table. Yes, it has generated significant wealth in its own right, but its impact will be felt just as strongly in private channels and offerings. As Athena Blockchain writes:
“Although ‘tokenization’ technology comes from the open network cryptocurrency community, which itself has generated significant wealth, the impact of tokenization technology will be greater when used to unlock liquidity and enhance demand in the global private placement markets, which issued more than $2.4 trillion USD in debt and equity securities in 2017 alone.”
In other to reach these heights and establish tokenized securities as viable financial instruments, there are significant hurdles to overcome. Athena Blockchain lists these hurdles as:
- Clean up fraud in the existing crypto world.
- Educate buyers on tokenized securities: information is far too asymmetrical now.
- Marketplaces need to be clearly established which firms like TokenSoft and dozens of others are building.
- After these three steps, “lobbying will be critical.”
The reality is that the public, lawmakers included, simply don’t know much about tokenized securities. Much of the financial market is also in the dark about this sector. Therefore, although we may have the basics of the necessary infrastructure in place, without this key aspect of educating the public the benefits of tokenization will never be felt.
What do you think of Athena Blockchain’s thoughts on tokenization and private placement markets? Do you agree with their conclusions? Let us know in the comments.
Image courtesy of Athena Blockchain.