Digital assets: tokenised securities aim to erase the ICO taint

Tokenized funding, once backed only by A4 spec sheets and Twitter accounts, is rising worldwide. One of the latest comes from Switzerland. It is backed by unquoted stocks in the sports resort business and by Credit Suisse, a traditional institution that prefers to support new financing methods.

Bank Has placed so-called equity security tokens in allia, which operates businesses including the Alpine Sports Center. Investors can trade these on the Taurus Digital Exchange, a platform operated by cryptocurrency services companies.

Security token promoters like to distinguish the problem from the first coin offering (ICO) that flourished a few years ago. These are often fraudulent and collapsed in 2017.

Tokenized securities can represent stocks, bonds, real estate, and intellectual property rights. Security Token Offerings (STOs) may benefit investors from local regulators and give investors legal claims against their underlying assets. For Alaia’s presumed investors, this means that the Group’s Ethereum-based stocks claim a clearing return and a low but traditional reward ranking.

Tokens have a clear appeal to start-ups and other small businesses. Ulrik K Lykke, co-founder of crypto hedge fund ARK36, states that issuance costs can be as low as one-fifth of traditional public equity offerings.

According to token specialist Blockstate, issuers raised approximately $ 500 million from 55 transactions worldwide in 2019. Three-quarters of previous transactions are for equity and almost all are based on Ethereum cryptocurrencies. The market capitalization of STOs traded almost doubled to $ 1.1 billion in August compared to March of this year.

Tokenized securities pose an interesting risk to banks such as Credit Suisse. Placing large issuances of stocks and bonds is an important business for them. So far, technology has helped, rather than replace, traditional book building. It is changing and may push down prices and overturn the old hierarchy. The only danger to the incumbent than the turmoil itself may be the inability to participate in it.

This is the fifth in a series of Lex notes this week on digital assets.We also covered Bitcoin price, Investment survey, Bitcoin ETF When Bank margin..