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When will the time of Security Token come?

by | 1 Mar 2021

Security tokens are crypto coins that represent a real asset, such as a share or a bond.
The only difference is that ownership is not settled and confirmed via paper, but via a blockchain, a “digital ledger”.
Security tokens offer the investor various financial rights such as profit dividends or equity. At the same time, Security Tokens always have a clear financial incentive and are regulated by a financial market supervisory authority.
What becomes possible thanks to Security Token? Example:
While owning real estate tends to be exclusive for the wealthy, fractional ownership with tokens can allow those with less financial resources to buy into an apartment.
If someone wants to get out, he can simply sell his share in the form of a token on a marketplace. The same model can be applied to other illiquid assets, such as art, classic cars and racehorses.
Currently, the volume and demand for security tokens is very low. There are two main reasons for this. First, there are only about two dozen such token projects and second, there is currently a lack of available exchanges on which to trade these securities.
However, both of these things could quickly change for the better, as several exchanges and also new interesting security token projects are in the starting blocks.
For example, the Swiss exchange SIX is launching such a Security Token compatible exchange called SIX Digital Exchange (SDX) this year (Q2-3 2021).
The Swiss exchange SIX expects its traditional trading platform to be overtaken by blockchain technology within a decade. Although stock and bond trading on SIX and most other exchanges is now fully electronic, the underlying processing steps are often based on old paper and postal protocols. “The existing system could be completely replaced by the digital exchange in about 10 years,” said Thomas Zeeb, head of securities and exchanges at SIX.
The SIX Digital Exchange (SDX) will initially run in parallel with the existing SIX platform, where a purchase or sale of securities is processed in three steps and often over several days. Two of these steps can disappear thanks to the use of blockchain technology, meaning a transaction can be completed in a fraction of a second.
Other exchanges, such as Stuttgart, Singapore and Nasdaq (New York), have also recognized the potential for greater efficiency and are launching digital versions of their official exchanges. This could eventually provide the necessary boost to bring volume, demand and confidence to the trading of regulated digital securities.
Stay tuned!