Tokenization as a Service
This letter is impersonal. It is a call for co-customization.
The ambition for the market is to ease the issuance and financing of securities in compliant ways. Therefore, enabling this market to be extended and secured for all players.
This project relies on Blockchain technology (or distributed ledgers).
Until today, this technology, which has existed since 2008, has only been used to market various types of cryptocurrencies, such as Bitcoin (payment token) or Ether (utility token).
This use, although growing, has been hampered by the complexity of launching a new crypto-currency outside the established circuits … and especially by the absence of real counterpart (for example in the form of assets) to the value of these “crypto-currencies”, which are therefore based only on confidence in the system put in place … and the hope of speculative gains …
A simple hope of gains, not based on counterparts, cannot constitute an investment strategy: that is why we want to push a standard, at the European level, allowing to build a digitized financial ecosystem, at the once creator of wealth, fair and safe.
This new evolutionary business model will make it possible to use the proven strengths of Blockchain technology, serving all types of asset issuance and financing new markets, by transforming them into a Digital Securities: Security Tokens. This new type of token is nothing more than an encrypted digital version of what used to be a paper title / contract, we call it: “Paper Wrap”.
The value of these tokens will, therefore, be systematically guaranteed by a counterparty since it will be based on a right to all or part of these assets, previously due diligented.
For the proper functioning of the device, the Tokenized assets will have of course been assessed and certified by a trusted third party prior to the issuing transaction (smart contracts audit / certifying expert).
This “Security Token Offering” (STO) approach has many advantages, and in particular, it makes it possible to respond to some of the flaws and vulnerabilities of the current financial markets:
• The transaction benefits from the advantages of blockchain technology, and it brings unquestionable advantages over current transactions, in terms of:
o Speed: the transaction is almost instantaneous, instead of requiring today from a few hours to a few days;
o Economy: technology avoids the passage through many expensive intermediaries. It also makes it possible to securely dematerialize transaction documents, which are now stored and duplicated by all stakeholders;
o Reliability: the ability of the blockchain to deliver chains of mathematical proofs of transactions, in an automated and systematic way, gives a guarantee on the security and the reality of the transactions, which are thus unfalsifiable. It also guarantees the impossibility of selling the same token to several investors;
• This new financial ecosystem makes it possible to reach a gigantic market. Indeed, all the financial assets currently marketed can be exchanged according to these new modalities, benefiting from additional qualities(faster, cheaper, more secure). But also, technology makes it possible to negotiate many assets that were not previously. Therefore, It will make it possible to put on the market a larger number of assets of all kinds, more easily accessible, with more agility (Internet) by a much wider potential audience of investors. In addition, the Tokens are divisible, which further increases their liquidity in a second-hand market.
• The characteristics of the issued Security Tokens can be fully customized, depending on the nature of the assets and the vision of the issuers(programmable rights: dividends, votes, revenue shares…
• The underlying business model for the Security Token Economy that is developing allows us to create as much liquidity in the private markets as in the public markets.
• The use of independent and trusted third party trusted to provide expertise, verification and certification of Token assets and their value, provides full confidence to potential investors.
• Technology provides full traceability, which provides all the guarantees of compliance demanded today and tomorrow by markets and stakeholders (in particular, Automated KYC / AML compliance). Which will ultimately help regulators and tax administration do their job more effectively.
The arrival of the Security Tokens represents a positive and virtuous evolution of the current model by providing more responsible, more efficient and more sustainable responses to the strategic, operational and legal needs of the stakeholders.
It is now crucial that this Security Token Offering (STO) technology is developed in France and Europe:
• To boost the French and European economy, by allowing their players to access new sources of financing, quickly, economically, safely and independently …
• To enable them to strengthen their financial autonomy, by being the driving force behind the establishment of a source of financing outside the dictates of certain international financial powers (international economic sanctions)
The project is part of this ambition:
• Develop the use of an online software tool: Software as a Service which unable Tokenization as a Service and holistic management. Which would allow the issuance of “Security Token”(Tokenized Titles) and their manipulation in a secure and controlled manner.
• Around this tool, it should be created an integrated service platform allowing to:
o Receive securities or assets aspiring to be tokenized
o Control and certify them
o Define the specific personalized issue strategy, with the holders of securities / assets.
o Design Security Tokens: The platform should allow you to issue many types of Security Tokens, especially at first:
o Tokenisation of investment funds (private equity, commercial real estate, venture capital) and we ambition to scale to any asset class.
o Make them available to the market
o Communicate to investors through the “Registry”: a Database for all “Underwriting deals”
o Ensure a reliable transaction and receive the proceeds of the sale
o Pay the various stakeholders precisely and regularly
o Ensure a reporting tool that will allow having a referential valuation of tokens
• We should define the standard that allows, at each stage, to make the service work in a legal, secure, standardized and compliant framework.
The views and opinions expressed in this article are those of me and do not necessarily reflect the official policy or position of any agency.