How STO Exchange Works?
Security tokens are here to stay long, and 2018 has already proved to becoming the buildup year for tokenization of securities and assets. New security token exchanges are emerging with passing time. But there are very few regulated STO exchanges owing to the lack of liquidity. Here liquidity indicates how easily and steadily assets or tokens could be purchased and sold on the market.
Here we will understand how STO exchange works and what functionalities enable compliant trading of security tokens. Let’s begin with little about the background of security tokens.
What is security tokens?
It’s just a digital asset complying to securities regulations. It is issued on the blockchain digitally. Since security tokens are definite financial securities, your tokens are backed by something tangible like the shares in a company, assets, profits, real estate or fine art, and crowd-funding backed assets.
Why security tokens?
If you tokenize private securities, it will let you trade assets more smoothly on a secondary market. You will be free from the administrator burdens of traditional securities. If we talk about the existing private security market, it is in the trillions. It is anticipated that the existing liquidity discounts would be as high as 20 to 30%.
Security token also offers advantages like no middle-man, increased inclusivity, rapid execution of deals, and much more.
Partner at Morgan Creek Blockchain Capital and frequent commentator on security tokens Anthony Pompliano stated that,
“Security tokens bring a number of improvements to traditional financial products by removing the middleman from investment transactions (usually some form of a banker). The removal of middlemen leads to lower fees, faster deal execution, free market exposure, larger potential investor base, automated service functions, and lack of financial institution manipulation.”
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