WP FINAL 221018 SPREADS F - Flipbook - Page 1
Why Tokenise Securities and Assets?
In the pre-digital age, before the days of virtual trading and buying stocks using an app on your smartphone,
investors would receive paper certificates that served as proof of their investment. These ‘Security Certificates’,
as they were known, have now been made redundant by technology. Nowadays, “security” is a catch-all term
for many kinds of investments – stocks, bonds, mutual funds and royalties etc.
Source: www.learnvest.com
In a report by Cognizant Executives, it is predicted that blockchain technologies will see increases in the
capabilities of the following areas, improving transparency and governance:
Improved compliance
Improved data management
Faster settlement time
Greater transparency
Transparency
Transparency is crucial to making a successful market. Many markets have floundered in the past through
a lack of accurate information, misinterpretation of risk and complacency. DLT will address many industry
pinch-points, embedding improvements which may lead to a more stable, transparent market. Removing
some human intervention and the use of smart contracts gives greater visibility of the processes and
procedures, ensuring risks taken are measured correctly, with regulation and governance in mind.
Liquidity
Traditional crowdfunding, private equity and venture capital (‘’VC’’) investments are typically illiquid, meaning
there is either no active secondary market or no secondary market exists altogether. By tokenising securities,
it is possible to add liquidity to a traditionally illiquid market. This is achieved by building a DLT system that
records the purchase and sale of the tokens which reflect the underlying holdings in the securities. Creating an
active marketplace of buyers and sellers of security tokens will lead to greater liquidity. Further still, by utilising
blockchain, businesses are able to create greater liquidity to enable shareholders to exit an investment at a time
of their choosing (subject to the corporate rules). This is a significant enabler for those people that own shares
in private companies. As an example, a small business owner may have given shares to his employees and
family, yet the ability for them to exit their investment is nearly impossible. By tokenising this the impossible
becomes a reality.
Settlement
Improved liquidity
Improved risk management
Lower transaction costs
Increased speed of digitisation
Fewer back office tasks
Streamlining of processes
Improved record keeping
Cost efficiencies
Reduced fraud
Heightened security
Source: www.cognizant.com/whitepapers/financial-services-building-blockchain-one-block-at-a-time-codex2742.pdf Date June 2018
Current settlement of securities has taken place on what is known as a T+2 (2 days) basis. With
advancements in technology, dematerialisation and blockchain it is possible to reduce this down to T+0,
meaning those that those buying the securities will be able to receive the securities on the same day as
they buy them (this would be in the secondary market only).
Accessibility
The Tokenise equity crowdfunding platform will open up the ability to invest in products, services and
securities to the masses rather than the few. Our platform intends to accept trading capabilities in multiple
cryptocurrencies (coins/tokens) in addition to traditional currencies (sometimes it may be necessary to
convert into cryptocurrencies).
Currency controls imposed by countries do not form part of the crypto ecosystem, potentially enabling more
people in various jurisdictions to invest in products that were previously only reserved for the elite. However,
each investor will need to ensure the investment is appropriate (including jurisdictionally compliant), answer
questions to ascertain their appropriateness, pass due diligence screening and be categorised (in the UK) into
one of the following:
• Everyday/Restricted Investor: anyone can become an Everyday/Restricted Investor,
there are just certain restrictions on how much can be invested. They must declare
they are putting no more than 10% of their net worth into an investment. Note: A
Restricted Investor cannot invest in an Unregulated Collective Investment Scheme.
• Sophisticated Investors: these Investors must meet the threshold competencies,
including a certain level of experience and/or professional background.
• High Net Worth: these investors must meet threshold competences, including certain
levels of savings and/or earnings.
TK038 V001
15