Tokens, Blockchain and the Wall Street

Security Tokens, ICO advisors, swiftly turning into STO advisors, Security Token Exchanges springing one after another: we are certainly experiencing a shift in the industry, but which one? Are we still talking about the startups, about the blockchain revolution that will give power back to the people under the full moon, and the forces that decentralisation will give to the poor? And this will be done with the help of Ether and the developers of the technology that is meant to decentralize currencies, or, perhaps, decentralize governments? It is clear that this was for the greater good of the World, but in the meantime, the ICO rain and the money that it brought for some, was also enjoyable and perfectly acceptable for many brilliant decentralization ideas that the ICOs have presented throughout the period of three years. It is amazing how creative people become when they are given a chance for broader thinking.


So what are the Security Tokens that everybody is talking about now, and why do we need them? Is this the creation of another token ‘vending machine’ under the different hood of raising money?


It is more or less clear to all, that the Securities Tokens are not the same as the Utilities Tokens, associated with the ICOs. Rather, the Securities Tokens are understood to represent equity: from the startup- perspective, they see it as doing an equity issuance and using the buzz or the technology of blockchain to attract the investors interested in getting exposure to Digital Asset related projects.


Securities Tokens can indeed represent equity in a startup, but it can also represent a bond, a convertible note, right to revenue or dividends. A Securities Token- a Digital Asset- can be constructed as a derivative, deriving value from the future cash flows of one or multiple assets generating revenue.


The most important thing that everyone is shouting about is that the Securities Tokens are like real life securities, requiring a thorough regulatory and compliance journey to issue and list the Digital Assets, mirroring the process and complying to the requirements of issuing financial instruments like it is done by the Investment Banks.


The thing is that some make it sound that the process of issuing the financial instruments and securities is a really scary process, which takes so long and costs so much that it is unlikely that this whole Security Tokens ecosystem would develop, as people would be reluctant to go though such a lengthy process requiring solid investments. In other words, who would want to do this, considering how easy it was to issue ICOs and collect billions of dollars within the matters of seconds?


The answer is:

The engine of the global economy is the financial markets and the people, organisations that run them- Investment Banks in New York, London, the exchanges from Asia to Frankfurt and Paris, the broker dealers, the licensed security issuance providers- all very important participants of the global economy- the financial market participants, who deal with, issue and trade the securities, debt and derivative instruments every day.


Previously, but not so long ago- when a payment was made, money, banknotes, actually exchanged hands. Today, when a payment is made, it is mostly done by credit cards or even via the mobile phones, and instead of the banknotes exchanging hands, a message is sent using the global telecommunications systems, instructing to make changes in the respective ledgers. It is a data activity- this transaction has everything to do with data and transmitting it, and nothing to do with the old concept of paying money.


The digital world demands digital money and digital securities.


The Security Tokens, which are Digital Assets representing real world financial, physical assets or derive value from the pool of assets, are an upgraded form of security. This is capital markets and securitization all in one.


If we think of the development of the Digital Assets ecosystem as of an upgrade of the way securities and financial instruments are issued, traded and transacted, then we can see that the players that are coming into this market are not the blockchain startups. It is the very experienced, licensed and well used to the regulations of the SEC- the Wall Street players.


Last week, Symbiont has closed a series B funding for its blockchain platform for the global financial markets. The investors came from the Wall Street — Galaxy Digital, Citi and others.


According to Symbiont’s press release, the company will use this funding round to accelerate deployments across multiple business verticals including Data Management, Mortgages, Private Equity, and Syndicated Loans. In addition to the investment, Nasdaq will explore new business opportunities to utilize Symbiont’s enterprise blockchain and smart contract platform, with existing and new clients that are seeking smart contract and tokenization solutions.


2019 and the years to come will be interesting ones, as they all are. But already now, we can see a sharp contrast between ‘let’s decentralize everything’ evangelists running around naked in the meadows of nowhere-land, to the Wall Street players, who are saying ‘we will unlock the liquidity of trillions of dollars worth of assets and we will use technology to wrap the securities into digital tokens’.


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