Digital securities have numerous benefits:

Intrinsic Value

Digital Securities represent the underlying interest in an asset. (Meaning Classical valuation methodology).

Programmability

Compliance is encoded into the digital securities; therefore, they are regulation-enforcing. You can also add business logic into the smart contracts allowing for automated events to occur. Which ease the management of investors and their rights?

Robust Record-Keeping

Just try to model record keeping with excel (migraine). Also, Blockchain solve the double spending problem; thus, it avoids the duplication of securities (it may happen with a mismanagement of registers). Finally, your register cannot be lost. With Excel, your computer can crash, be hacked or erased; with paper, any natural disaster may imply its loss. The fact that the information on blockchain is immutable solves those risks. Blockchain is a 100% recovery plan.

Rich improvement of the settlement and clearing system à greater transfer speed!

It may seem as an existing specification for the end user, however between intermediaries it is not the case which increases the fees for the end user. How much time does it take to update the shareholders register of a non-listed company once they have been identified?

Digital Proof of Ownership / Self Sovereignty

Which wasn’t the case before. (remember the entitlement of the entitlement. You just owned an entitlement when you thought having bought a financial security (not fun)). With the immutability and the legal value of blockchain, every transfer has a trace which helps to avoid fraud. It also makes impossible to “double spend” the security token which also helps avoiding false transaction. However, Identity management is still something the ecosystem have to work on!

Auditability (Predictable supply)

It works both ways, on one side investors have a clear vision of the issuer’s scope, including the breakdown of the tokens and information about the issuer. On the other side, the issuer knows who invests (which was not necessarily the case). Also, the model allows a healthy capital formation and protection from external fraudulent activities (specifically with the accessibility opens by the new commercial gateways allowed by Blockchain)

Fungible

Fractional ownership / Divisibility participates to incentivize liquidity

Wallets allows to bundle in the same place various asset class (Real Estate, Equity, bonds etc.)

Easy Portability thanks to private keys:

You can be your own bank! (Sweet!)

Enable new business models

  • Hybrid Utility
  • Security coupled to fractional ownership could rethink co-ownership
  • Co-living use cases

Liquid

This is where the haters get in.

  • Let’s start by the legal definition of liquidity: Any asset than can be cash out in less than a week is considered liquid) add to this the decrease in the friction in the transaction the more market depth should be found.
  • Even if in those early days there will be low liquidity because of low participant, relatively speaking to traditional markets, Market makers will allow cash out in less than a week, in terms of Markets.
  • Considering a Private Equity fund that has 4 years lock up period, we have some margin…
  • In terms of funding, the right infrastructure (disclosures, p2p trading, Custody, exchanges, futures…) are being built faster than people expect…

“A small amount of liquidity is still better than no liquidity”

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