Blockchain is powering the fast-growing cryptocurrency industry and evolving traditional finance as well. However, the most promising use case these days is the trading of digital securities. Here you will discover what digital securities are and how they improve the capital market.
What are digital security tokens?
The tokenized securities that are represented digitally on the blockchain are digital security tokens. They reside on a decentralized network to preview securities laws. Financial securities are instruments used to raise funds in the public and private markets. They are basically categorized into three categories:
· Equity
· Debt
· Hybrid
Equity is a stake in private companies or stock in public companies; debt is basically bonds, and a hybrid combines convertible bonds and preferred stock. On the same hand, commodities are not securities, but derivatives like gold are! In recent years trend of digital security tokens and digitalization has accelerated. Investors are now analyzing the rapid growth of crypto sectors like decentralized finance (Defi) and non-fungible tokens (NFTs). Traditional securities are also adopting the technology. The market is huge and is likely to grow in upcoming years.
A study done by the Securities Industry and Financial Market Association (SIFMA) shows the market value of a global bond is at $119 trillion. In addition, the total assets under management reached an all-time high of $7.4 trillion. The blockchain industry is might underlying infrastructure for all securities, but the immediate winners are those who invested in private equity markets.
How do Digital Securities Impact Capital Raising?
Capital raising has been raised due to digital securities. Venture capital is now the most popular use of digital security tokens, and many businesses are holding security token offerings (STOs). It represents a convenient fundraising mechanism for individual investors from all over the world. In addition, digital security removes frictions that have been hindering the transfer of private assets by offering a great opportunity, efficiency, and liquidity to issuers and investors.
Smart contracts run digital securities, and blockchain enables an entity to tokenize any type of security. The units are pegged to the real-world value through oracles, and special programs connect all the applications with that data. Capital raising involves high issuer cost, and many processes automate while issuers can fractionalize liquid assets.
RedMatter: A Home for Digital Securities
The promise of borderless liquidity is the best aspect of digital securities. They represent the most illiquid assets, such as real estate and art trading on the global market. Investors can buy, sell and trade digital securities based on their eligibility. Funds that provide digital securities can let investors enter or exit the market. RedMatter Capital offers you the opportunity to invest in digital security tokens easily. Grab all the insights by visiting our official website.
Also Read: Asset Backed Tokens: A Quick Guide to Help You Invest!