Coinbase, Ripple Invest in Securitize to “Tokenize the $7 Trillion Securities Industry”
On November 26th 2018, Securitize finalized its Series A investment round. The security token compliance platform raised $12.75 million from notable enterprises such as Coinbase and Ripple. It will utilize the funding to advance its development in the tokenization of the $7 trillion securities industry.
What is Securitize?
Securitize is a platform which specializes in the compliant issuance of security tokens, also referred to as ‘digital securities’.
Their Series A investment round— led by Blockchain Capital— just recently closed, raising nearly $13 million. Notable participants included Coinbase Ventures, the venture capitalist branch of Coinbase, Ripple’s Xpring fund, and Japan’s Global Brain.
The majority of investment funds were received in traditional fiat currency, with a small portion of unspecified digital currency which Securitize plans to either convert to fiat or hold in a stablecoin.
Securitize aims to tokenize traditional financial securities, such as shares. The process of tokenization has significant benefits when compared to the conventional securities sector.
The Benefits of Security Tokens Explained
In differing from utility tokens, security tokens explicitly declare themselves as securities. They are therefore subject to the existing laws and regulations established by the appropriate bodies, such as the SEC in the United States. When it comes to tokenization, programmable smart contracts allow for the transparent enforcement of applicable securities regulations. Several ERC-20 compatible security token standards are already live on Ethereum.
Additionally, security token exchanges— more appropriately referred to as Alternative Trading Systems (ATSs)— operate 24 hours a day, seven days a week, 365 days a year. The increased window allows for added liquidity which is absent from traditional stock exchanges. The New York Stock Exchange (NYSE), for example, operates from 9:30am – 4:00pm, Monday – Friday and is closed on nine holidays throughout the year.
Further, fractionalized ownership of highly-valued assets also brings advantages to both businesses and investors.
For a business wishing to raise a large amount of capital, the pool of both interested and liquid investors is expanded to a much larger group of investors. With more investors able to invest in the asset for a smaller, ‘fractional’ piece of ownership, the need for one investor with $5 million can be surpassed by 100 investors with $50k— a much more feasible possibility.
When it comes to investors, fractionalized ownership opens the door to investments which have otherwise been limited to a select few.
The benefits have reached vast areas as security tokens have already seen implementation in property development, equity, investment funds, and even a Picasso painting. In fact, professional sports teams have expressed interest in tokenizing ownership.
How Securitize Plans to Tokenize the $7 Trillion Securities Industry
Securitize aims to become a pioneer in this quickly developing space. They’ve developed the Digital Securities Protocol (DSS), an ERC-20 compatible security token standard. Through the DSS, companies can launch their own ‘digital security offerings’, thereby tokenizing their very own real-world assets and selling them in a compliant manner with revolutionary benefits offered by blockchain technology.
“2019 will be the year that you see 10-15 exchanges trading securities in a legal way.”
With financial support from the likes of Coinbase and Ripple, it’s hard to look past such a statement.
What do you think of notable firms such as Coinbase and Ripple investing in Securitize? What does this say about the future of the security token industry? We’d love to know what you think in the comments below.
Image courtesy of Securitize.