Exchanges Seek Next Hot Trend in Security Tokens

 In Exchanges, Governments and Regulations

The latest Diar report shows security tokens are still under development, but market operators are already seeking the infrastructure to adopt these types of assets.

Exchanges are seeking new revenue streams, and security tokens may be the answer, shows the latest Diar report. Exchanges are seeking ways to offer tokenized securities, linking the world of traditional finance and assets with the movement of tokens.

The motivation of exchanges is the failure of some tokens to convince traders of their value and utility and are backing tokens with real-world assets, whether currency, real estate, or securities. The Diar report sums up the trend:

“Cryptocurrency exchanges are also acutely aware that, for the most part, the tokens they list don’t currently satisfy a utility purpose. Diving into deep pockets, exchanges are diversifying their portfolio by investing in various parts of the ecosystem to support the long-term growth of an industry stuck in development.”

This solves the long-running problem of seeing ICOs offer no share of the underlying business, and not even the promised token utility. ICOs only superficially resemble equity, but tokens are sold with the warning that they do not represent securities. In the future development of the crypto space, the tides may turn, and security tokens may become acceptable.

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For now, the most promising partnership to offer tokenized securities is between Binance and the Malta Stock Exchange, although security tokens are yet to happen. For now, the only class of asset-backed tokens and coins is the use case for stablecoins, or dollar-pegged coins and tokens. Coinbase is also leading the way in preparing services capable of offering security tokens or tokenized securities, initially limited to accredited investors.

Other smaller projects like Polymath, Desico, OpenFinance and some are offering curated token generation to represent securities. Security tokens are seen as more of a regulatory than a technological challenge.

The drive for security tokens also puts a question mark on the matter of decentralization. A security token may have to prioritize compliance and control, instead of grass-roots, community influence.

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