From stock exchanges to asset exchanges

Charles-Henry Monchau and Valérie Noel
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Charles-Henry Monchau: Chief Investment Officer, Banque Syz SA, Switzerland
Valérie Noel: Head of Trading, Banque Syz SA, Switzerland

Journal of Securities Operations & Custody, 2022, vol. 14, issue 4, 355-365

Abstract: In the digital assets universe, a security token is more than a currency — it often represents ownership of an underlying real-world asset. Indeed, the SEC hearings have changed the future of how cryptocurrencies work through more stringent regulations. Unlike ICOs — which collapsed during the 2017 craze — STOs — which stands for Security Token Offerings — are actual financial securities and thus backed by something tangible like the assets, profits or revenue of a company or an asset. In the coming years, we are likely to see a significant rise in the number of STOs. Indeed, while institutional investors have consistently stayed away from cryptocurrencies and ICOs in the past, the reasoning they used in keeping such a distance (aka we do not invest in unregulated securities) does not apply to security tokens. One of the most promising features of security tokens and STOs is their ability to offer tokens as a digital representation of shares of a company's stock. In addition to the tokenisation of company shares, real goods and assets can stand behind the tokens. In the future, the widespread tokenisation of real assets could become a new trend. One of the most promising markets for tokenisation is real estate. Tokenisation of a residential house will give people the opportunity to become its owners and conduct voting on digital platforms, making decisions based on the share of each of the voters in the house. In our opinion, tokenisation will thus enable the democratisation of capital markets. It will also make the market more efficient. And finally, tokenisation will open up trillions of dollars in liquidity. In short, tokenised securities are bridging the gap between traditional (financial and real) assets and crypto markets because they are aligned with everyone's interest. And this will be hugely disruptive.

Keywords: tokenisation; STOs; private assets; cryptocurrencies; digital assets; asset exchanges (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2022
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