Cryptocurrency News

Security tokens could be the next big use case for blockchain technology

Is Tokenization of Securities the Way of the Future? In an interview with Raiffeisen Bank International, the bankers who lead its blockchain research center said that in fact, by 2030, most securities will be tokenized. In order to gain a deeper understanding of how blockchain technology could transform traditional stock exchanges, Cointelegraph Research compiled a dataset of all security token offerings and found that nearly $5 billion were raised in 2020.

Cointelegraph’s first report on security tokens explains how bond and stock tokens work, how many assets have already been tokenized, what returns they have given, and how they are regulated in different countries.

a new opportunity

A recent trend is the re-emergence of securities self-custodial and bearer financial instruments. Tokenization of financial instruments allows investors to withdraw securities from one exchange and send them to a new exchange with a private key.

Exchanges can attract investors to deposit securities by offering interest on their deposits to lend their securities to the exchange, which in turn will lend the shares to other borrowers. Exchanges may allow investors to use their securities as collateral for loans or margin trading.

This would lead to a drastic change in demand for securities, as fewer investors would sell and trigger taxable events to gain liquidity. The demand for attractive securities will also increase, as a global pool of investors will now be able to easily invest in securities in other countries.

download full report hereComplete with charts and infographics.

The daily trading volume on Binance and FTX for tokenized traditional stocks such as Tesla (TSLA), Coinbase (COIN), GameStop (GME) and Apple (AAPL) exceeds the monthly trading volume for all security tokens on popular security token exchanges. , such as tZERO, Merj, Open Finance Network and TokenSoft.

Daily trading volume for tokenized traditional shares exceeded $4 million in a single day on Binance and FTX in early May, compared to $3.9 million on tZERO, Merj, the Open Finance Network and TokenSoft throughout the month of April. The total security token market capitalization is hovering around $700 million. It may cross $1 billion by the end of Q3, 2021.

The 93-page report carefully assessed the industry expertise of 13 authors from six countries, all of whom work at the forefront of this capital market development. Insights include how bond tokenization works from Dominic Speicher, blockchain applications specialist at Crypto Finance AG in Switzerland and how regulations are affecting security token markets in various countries from PricewaterhouseCoopers and the General Council for Blocks.

The report is co-published by Cointelegraph Research and Crypto Research Reports.