Stephen McKeon Details the ‘Eight Key Features’ that will Accelerate Security Token Adoption
Stephen McKeon is an Associate Professor of Finance at the University of Oregon, a partner at Collaborative Fund, and author of critically acclaimed whitepaper, the Security Token Thesis. In a recent podcast with the Security Token Academy, McKeon outlined eight features which he says will facilitate the adoption of security tokens.
How Security Tokens Will Transform Capital Markets
In a new episode of the “Security Token Stories” podcast, McKeon says there are eight critical features that will transform the current structure of capital markets.
In a matter time, McKeon says security tokens will be leveraged to further develop the way traditional financial asset ownership is traded and reported.
The following are eight significant benefits that are likely to lead to the accelerated implementation of security tokens:
· 24/7 Markets: This is legitimately possible by moving asset ownership on-chain. Yet McKeon says that isn’t even a necessary condition for 24/7 markets. Stock markets simply don’t operate 24/7, but they could. The world of blockchain-based assets has already grown accustomed to 24/7 markets, and this is not likely to change with security tokens.
· Fractionalization: The benefit here is straightforward. The fractional ownership of high-valued assets will open the door to new asset classes for retail investors. It will also increase the liquidity of high-valued assets and save investors money when they need to sell their asset in a hurry.
· Rapid settlement: Traditionally, trades can be executed quickly. Yet the settlement aspect— where the money and the asset actually changes hands— takes much longer. Blockchain technology can bring significant changes here.
· Cost reduction throughout the life cycle of a security: Many costs which are typically associated with traditional financial securities can be reduced, including advisory and marketing process. Yet perhaps most significantly, administrative work can be standardized, which is anticipated to suppress a high amount of costs.
· Increased liquidity and market depth: The majority of private assets are illiquid, which means the ownership interests are costly and difficult to trade. Secondary markets however, enable security tokens to “lock in the capital without locking in the investors”, as explained by Harbor CEO Josh Stein.
· Automated compliance: Security tokens are programmable. This means that the necessary criteria to ensure regulatory compliance can be pre-programmed and algorithmically enforced prior to a security token ever reaching the market.
· Asset interoperability: This point is larger than digital vs paper. In our current world, most asset ownership is already represented digitally. The real problem with the world’s existing system is this: while asset ownership claims are represented digitally, there are a high number of digital systems which don’t play with each other. This inhibits the ability to compliantly trade assets, which interoperable blockchains can solve.
· Expansion of the design space for security contracts: Security tokens allow us to build in contractual features that have previously been infeasible to execute. They move us closer to the economic concept of complete contracts.
What do you think about McKeon’s thoughts on the benefits of security tokens? Let us know in the comments section below.
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