Group Co.
Security Token Issuance Set To Rise
Traders Magazine Online News, January 28, 2019
Boards of listed companies are already discussing the possibility of issuing security tokens according to Henry James, deputy chief executive and co-founder of Fincross International, a new digital and fintech investment bank.
Fincross was launched to bridge the token economy and traditional assets for institutions and is led by Eddy Abramo, former chief executive of the Middle East and Africa at French bank Société Générale.
James told Markets Media: “The security token market will dwarf the cryptocurrency market. They can represent fractional ownership of illiquid assets such real estate or art and so are more stable and easier to value for investors than cryptocurrencies.”
He explained that tokens can be issued on a distributed ledger but can attract institutional investors because an offering is regulated like a normal security, such as in an initial public offering for equities.
“A security token offering (STO) is more competitively priced than an equities issue and are being discussed at the board level of four companies in the French CAC 40 index,” added James.
He highlighted that the St Regis Hotel in Aspen raised $18m from accredited investors in an STO in the US last year. Fincross plans to hold its own token sale this year.
James continued that obstacles to market growth are lack of regulatory clarity, as tokenized assets have no borders, and the lack of infrastructure for secondary trading.
Consultancy Aite Group agreed in its report, Top 10 Trends in Institutional Securities & Investments, 2019: More M&A Ahead, that security tokens are becoming increasingly popular. Gabriel Wang, analyst at Aite, said in a webcast to discuss the report that in theory, any fiat assets can be tokenized with increased transparency, enhanced liquidity, and reduced transaction costs.
“Aite Group expects to see a growing number of firms (including some of the incumbent Wall Street firms) starting to offer security tokens as part of their blockchain innovation in 2019,” he added. “Global exchanges can also work with blockchain startups to develop security token products that can be listed on the exchanges, and build out dedicated trading platforms. “
Custody
One of the main hurdles holding back the institutional trading of cryptocurrencies is the lack of trusted custody solutions according to a survey from GreySpark Partners last year. The consultancy said in a report “The market is waiting for big houses such as State Street and Northern Trust to take on this role. Difficulties in accessing liquidity or finding capital-efficient instruments for short or hedge positions is also an issue.”
Fincross intends to launch a digital asset custody service in April this year.
James explained that insurance costs for digital assets can be prohibitive but Fincross will launch its service in partnership with a German insurance company, who will hold one of the four private keys required to access the assets. James said: “The cost will come down to less than 1%.”
This week GMEX, a provider of multi-asset exchange and post-trade business and technology solutions, also announced it has launched ForumCustody and ForumWallet, part of the GMEX Fusion product suite to include digital custodian and vault capabilities.
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