Could Ethereum Be The Best Choice To Tokenize Securities?
Securities are investment instruments that can be bought and sold in financial markets. Some of these examples are bonds, debentures, notes, options, shares and many others. However, they have some problems related to security, since they can be affected by fraud or physical theft.
Using blockchain technology, this issue could be solved and enhanced. Securities can be notarized, something similar to what Austria did issuing bonds on the Ethereum network. Tokens on the ETH network can be created using smart contracts that have name and value on the Ethereum network.
This is why this blockchain platform has been so famous for initial Coin Offerings (ICOs) that were able to create tokens and sell them later on the market. With this trend tokenizing asses, securities would be more secure and easily accessible for other individuals and investors that now are not able to purchase these assets.
Around the world, there are some examples of tokenization and how they can improve different aspects of the financial world. In the European Union (EU), the company DESICO is the first regulated blockchain venture in the continent that offers end-to-end encryption services. This allows companies and interested parties to issue and trade tokenized securities. This company is able to increase security for investors and companies while allowing securities to be more accessible to other individuals.
On the matter, Desico co-founder and CEO, Laimonas Noreika, explained that tokenization and blockchain technology will bring more transparency.
On the matter, he commented:
“Yes tokenization, together with blockchain technology, will bring partial ownership. Yes, it will bring more transparency. However, it will not change existing securities laws. Actually, I believe that tokens need securitization much more than securities need tokens, at least at the current stage of the market.”
However, he explained that the impact would not be as fast as many individuals and experts believe. Changes will take time to be applied and stock and equities markets would not dramatically change in the next few years. Additionally, he said that he thinks that it will not be possible to replace all the old system with the new one. Instead, both financial systems would work at the same time and co-exist.
Ethereum, one of the most important blockchain networks on the market, could be one of the more benefited with this.
He said that Ethereum is the only network that is live and working without major disadvantages. However, Ethereum needs to be able to scale if it wants to offer better services and be a tool for securities to be tokenized.
Clearly, tokenizing securities would allow the financial market to avoid several problems and enhance the overall market. This would bring transparency and security that the traditional financial market needs, something that can be already seen with the issuance of bonds in Austria.
Ethereum has been tested by several companies and governments and shows that it has all the necessary requirements to increase the efficiency of the traditional financial market.