GLOBAL PERSPECTIVES

Security Tokens: Where Digital Assets Meet the Real World

Feb 9, 2018 | 09:00 GMT

Physical representations of Bitcoin tokens, a digital currency, stand on a computer at a shop in Tel Aviv, Israel.

A picture taken on February 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the 'Bitcoin Change' shop in the Israeli city of Tel Aviv. / AFP PHOTO / JACK GUEZ (Photo credit should read JACK GUEZ/AFP/Getty Images)

(JACK GUEZ/AFP/Getty Images)

Highlights

  • As investors start to question the underlying value of cryptocurrencies like Bitcoin, Ethereum and Ripple, markets will turn to a different class of digital assets: security tokens.
  • Security tokens promise to appeal to a wider pool of investors because, unlike utility tokens such as Bitcoin, they have real-world assets behind them.
  • Security tokens could democratize access to investment for investors and entrepreneurs alike by enabling a larger number of parties to hold smaller amounts of equity in a project or company.

The gold rush of cryptocurrencies has created a new class of billionaires, digitally rich from having foresight into a world-changing technology: blockchain. It's been an exhilarating ride that has rapidly created immense wealth. Digital currencies such as Bitcoin, Ethereum and Ripple powered the growth by appreciating over 30,000 percent last year. Droves of enterprising individuals, however, saw the boom as an opportunity to try to create ecosystems of uncertain value through initial coin offerings, prompting concerns about today's well-documented cryptocurrency bubble. Now it looks like the bubble may burst as investors start to question the underlying value of these currencies. The big question, then, is what's next? As the worlds of technology and finance continue to innovate, markets will turn their attention to the security token. The new asset class promises to bring the cryptocurrency trend to a wider pool of investors who want real-world value behind the digital assets in...

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