There is a multi-trillion-dollar world out there.
Illiquid, privately held assets ready to be tokenized on the blockchain. Security tokens are the most logical connection between classic finance and blockchain, giving benefits to both.
Even if the security token offering (STO) market is still young and in the early stages of development, it shows potential in the entrepreneurial and finance scene. Some companies, banks, and institutions are already pioneering new financial products.
This decade will certainly see the rise of this unique type of token, which represents one of the most promising applications of blockchain technology yet.
Let’s look at some of the most significant examples within this industry to understand what has already been done.
Colorado State passes bill to using security tokens for raising state capital
In May, the State of Colorado passed a bill requiring the state treasurer to explore using security tokens for state capital financing by March 2023. If the treasurer recommends a go-ahead with blockchain-based funding, an additional law to authorize security tokens would need to be passed. Real estate assets would back the security tokens.
State financing traditionally comes through income taxes, sales taxes, and federal transfers. Colorado could be the first state to turn to crypto to increase its funding options to reinvest into infrastructure and services.
The bill also sets out guidelines for what will happen if the bill passes. Security Tokens, according to the bill, will
- Allow all investors, including retail, to invest
- Reduce State’s reliance on commercial banks
- Reduction in overall state costs
Beauty Firm Oddity Launches Security Token Dubbed Oddity Token
The parent company of the famous beauty brand Il Makiage and Spoiled Child, Oddity, unveils its digital security token on the Ethereum blockchain. The company has named it Oddity Token. It is the first-ever non-crypto firm that linked cryptocurrency as a way for investors to purchase equity ownership of the firm.
The token automatically converts into Oddity Class A ordinary shares in the same amount of time as an IPO at a 20% discount to the IPO price, according to Oddity. It is reportedly the first non-crypto company to ever tie digital security to equity ownership.
This move aims to extend the investment opportunities as security tokens allow private companies to raise funds before an IPO (Initial Public Offering) and get pre-IPO investments.
Oran Holtzman, the CEO, and co-founder of the Oddity expressed;
By offering this trailblazing token, we are democratizing investor opportunity by broadening individual access to Oddity securities, as we continue to disrupt and redefine the beauty and wellness category.
Tokenized securities: the EU opens the door for DLT market infrastructures
After almost two years of long and cumbersome EU legislative making process, last week the European Parliament and Council finalized the legislation for the EU’s pilot regime for tokenized securities. These are defined as crypto-assets that qualify as financial instruments, such as stocks, bonds, money market securities and funds. That’s in contrast to cryptocurrencies and stable coins covered by the EU’s MiCA legislation. The size limits for stock issuance mean this program won’t be suitable for unicorns to raise funds other than through bonds.
The new law comes into force on 23 March 2023 for three years, with the possibility of another three-year extension. It allows some temporary exemptions to certain securities regulations. The DLT pilot plan aims to enable innovators to advance their platforms while providing a safe environment for users.
JPMorgan Wants to Bring Trillions of Dollars of Tokenized Assets to DeFi
PMorgan (JPM) hopes it has found a way for decentralized finance (DeFi) developers to leverage the yield-generating potential of non-crypto assets.
Speaking to CoinDesk at Consensus 2022 in Austin, Texas, Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, described in detail the bank’s institutional-grade DeFi plans and highlighted how much value in tokenized assets is waiting in the wings.
“Over time, we think tokenizing U.S. Treasurys or money market fund shares, for example, means these could all potentially be used as collateral in DeFi pools,” Lobban said. “The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets.”
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