Much of the financial world today is involved in the trading of securities — from stocks to bonds to equity, the law on securities has been made clear over the decades. However, the emerging cryptocurrency market has reached a ceiling in its accessibility due to the legal ambiguities that currently exist. It’s time for us to acknowledge the emerging importance of compliant, tokenized securities.
The Inevitable Future of Tokenized Securities
Although the SEC has already made clear that Bitcoin is a commodity rather than a security, the future of most ICOs and tokens remains on shaky footing. Most tokens today would better be classified as securities, and will officially be so in due time.
Although still a new concept, it seems inevitable that, as cryptocurrencies continue to form a larger and larger portion of the fintech sector, asset-backed tokenized securities will form a large portion of this new market.
Tokenized securities have a high chance of replacing much of today’s financial infrastructure, since not only do they provide ease of access, but they are also more secure than existing data systems. Most importantly, however, they allow for more liquidity in markets that historically lack it, like the real estate market.
Much of the financial and tech world is opening up to this simple reality. Just recently, Rob Nance, the CEO of CityBlockCapital, spoke clearly about the importance of tokenized securities stating, “security tokens will drive the adoption of cryptocurrency for mainstream investors.”
CityBlockCapital is an emerging venture capital firm that is looking to tokenize early-stage funding for startups.
Ultimately, however, many pieces need to come together for tokenized securities to be an everyday reality for the financial world.
- Firstly, there needs to be custodial services and secure markets for larger institutions who want to purchase cryptocurrencies.
- Secondly, there must exist clear stablecoins which would be traded against tokenized securities. Some firms are already developing such as idea, such as the Gemini Dollar and Dollar Coin.
- Thirdly, the legal situation still must be made clear: this requires significant effort on the cryptocurrency community to appeal to lawmakers to make this a reality.
- Finally, the community should consider adopting an altogether different token standard or consensus method for securities since the criteria is different.
Once the tokenization of backed assets reaches critical mass and becomes the standard, we will finally begin to see the cryptocurrency space become synonymous with the actual financial world. At first, tokenized securities will seem sparse and far in between, but within the next few years we will certainly see a massive amount of financial assets be token-based.
Boasting many proven advantages over existing financial data-storage and processing systems, blockchain will certainly rock all of our traditional asset classes. Tokenized securities seem to be the next logical step.
Where do you see the future of securities heading? Do you believe that eventually most of our assets will be tokenized? Leave your thoughts in the comments below.
Image courtesy of Listing Maniac.