What Are Tokenized Securities?
Tokenized securities refer to the representation of ownership in a traditional security through the issuance of a token that is registered on a blockchain or distributed ledger technology (DLT) infrastructure.
These tokens can represent various types of securities such as equities, bonds, or investment funds.
Revolutionizing Ownership
Tokenization is the process of converting ownership rights to an asset into a digital token.
In the context of tokenized securities, these tokens serve as blockchain-based tradable financial assets that represent an investment in the underlying security.
Securities are financial assets that hold value and can be categorized into different types.
Equities represent ownership in a company through common or preferred stock.
Debt securities represent borrowed money that needs to be repaid.
Investment funds pool capital from multiple investors to collectively invest in securities or assets, with each investor retaining a proportional ownership stake.
Unlocking Liquidity
Tokenized securities can also represent ownership in traditionally illiquid assets such as real estate and fine art.
By tokenizing these assets, they become more easily tradable, reducing barriers to entry for investors in these markets.
A token that represents ownership rights can be subdivided and traded, with records of all transactions and ownership stored on a blockchain system.
The use of distributed ledger technology, such as blockchain, eliminates the need for traditional third-party recordkeepers.
Blockchain technology utilizes complex algorithms to maintain the ledger of transactions and verify ownership.
Tokenized securities are typically created through security token offerings (STOs) and are subject to regulatory frameworks specific to the jurisdiction in which they are offered.