Tokenization

Security tokenization is the process of materialising the ownership of a security through the issuance of a “token” registered on a distributed ledger technology (DLT) infrastructure. Click here for more
A number of service functions that are currently carried out by middlemen can be automated through the blockchain. Through an STO, the processes can be simplified and automated via Smart Contracts, and also by sharing the same information. Click here for more
Investors can view their investment information through an SDC private investor portal whilst providing transparency with governance and ownership. Click here for more
Many articles are written on the tokenization of securities. Funds, Real Estate and Fine Art are just the beginning. Click here for more

Security Tokenization – An Introduction

Digital Securities Alliance – TOKENY & DLA PIPER 

From Start to Finish: How Tokenization Platforms Work

What People are Saying About the Tokenization of Assets

We thank Tokeny Sàrl for much of the information provided below. A comprehensive explanation of Security Tokenization can be found in their E-book ‘Tokenized Securities‘ – Available here 

Background


Security Tokens/Investment fund relationship
An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities. Each investor retains ownership and control of their own shares. The same principle can be tokenized, and these tokens can represent shares in the fund. Security tokenization is the process of materialising the ownership of a security through the issuance of a “token” registered on a distributed ledger technology (DLT) infrastructure. Therefore, a tokenized security can be equity, a bond, or an investment fund. It could also represent a securitized fraction of a physical asset (e.g. a piece of art or real estate).

Smart Contracts
Smart Contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements exist across a distributed, decentralized blockchain network. Smart Contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, a legal system or external enforcement mechanism. They render transactions traceable, transparent and irreversible.

S.A.F.T. – Simple Agreement for Future Tokens
A SAFT is an investment contract offered by SDC to accredited investors. It is considered a security and thus, must comply with securities regulations. Subscriptions for the SDC Series Security Tokens completed prior to the release of the SDC Security Token will be confirmed through a SAFT (Simple Agreement for Future Tokens)

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Advantages of Security Tokenization


Automation

A number of service functions that are currently carried out by middlemen can be automated through the blockchain. Through an STO, the processes can be simplified and automated via Smart Contracts, and also by sharing the same information. Issuers offer shares directly to investors, making the information accurate, transparent and unchangeable.

Shared information and Transparency
Security Tokens eliminate the asymmetry of information that is present during the actual transfer of ownership of a specific security. Using the blockchain as a central source of truth, is shared by every player on the value chain. The tokenization of securities on a blockchain will also make governance and ownership more transparent and reliable than a traditional private security offering.

Cost-effective
In the traditional securities markets, middlemen charge significant fees for their services. By using blockchain technology and Smart Contracts, issuers can cut out many of the typical, low-value added, expensive intermediaries that are needed for offerings.  This in turn will re-create the links, allowing the issuers and their investors to have a more direct relationship with one another.

Immutability – (Permanence)
Investors and regulators need to trust organizations because there is no control mechanism making the data unchangeable in the first place. This is where blockchain can add substantial value. Once an investor buys tokens on a blockchain, nobody can erase the history of his ownership. Once data has been written to a blockchain, i.e. after a transaction has occurred, nobody, not even a system administrator, can change it. This is highly beneficial when it comes to auditing, as you can prove your data hasn’t been altered, reducing time and costs.

Liquidity
Privately issued securities are often difficult to trade and therefore have been highly illiquid. The use of blockchain allows value to circulate more easily by bringing online trust, as it prevents the “double spending” problem. The ability to fractionalize tangible assets through tokenization can also bring liquidity into these markets that have had little to no access to it. Traditionally, private securities could only be traded on secondary markets after using an extensive amount of middlemen and following strict, difficult to navigate regulations. By streamlining and automating these processes and by using a common distributed infrastructure, companies can remove the burdensome hurdles that previously restricted the liquidity of their securities.

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Benefits of SDC Security Tokens

  • Investors can view their investment information through an SDC private investor portal.
  • Provides transparency with governance and ownership.
  • Smart Contracts within the Security Token architecture can define the rules around an agreement in the same way that a traditional contract does, but also automatically enforces those obligations. Those rules can include:
      • Client KYC/AML compliance
      • Legal compliance requirements
      • Attractive dividend rates
      • Redemption terms and payments
      • Voting rights on preferences regarding allocation of SDC profits to specific social enterprise projects nominated

Security Token Description
All security token investments will be securitized with industry standard ERC20 permissioned Security Tokens utilising Tokeny’s just released T-REX (Token for Regulated EXchanges). SDC will issue tokens having a fixed value and will be 100% cash backed and insured against loss or theft as provided in the T-Rex architecture. Subscriptions can be made in either USD or EUR.
SDC – SIIF ● Mechanism for Investment
Subscriptions for the SDC Security Tokens completed prior to the release of the SDC Security Token will be confirmed through a SAFT (Simple Agreement for Future Tokens) A SAFT is an investment contract offered by cryptocurrency developers to accredited investors. It is considered a security and, thus, must comply with securities regulations. KYC and escrow of investment funds – for global compliance investor suitability must first be verified.
Redemption – SDC Buyback
At the completion of the investment term, SDC will secure from the investor the first option to redeem the SDC security tokens at the price paid on purchase.
Client Reporting and Auditing
SDC token holders will be issued periodic audited account statements. These statements will verify both the cash backing account, the dividend accrued to date and the integrity of the the Client’s token wallet. Through the proprietary SDC Client Portal, clients will be able to have access to real time account information and projected SDC Buyback amount including dividends due and rollover bonuses, if applicable.

Media Links

St. Regis Aspen Resort Raises $18 Million via Security Token Offering 
Elevated Returns, a hospitality-focused asset management company, recently announced the closing of the Aspen Digital real estate token sale, which raised $18 million… read more

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A First For Manhattan: $30M Real Estate Property Tokenized With Blockchain
A luxury Manhattan condo development is getting a new digital home on the worldwide Ethereum blockchain.  The building, a completed 12 unit construction with 1700 sq ft units located on 436 & 442 E 13th St in the East Village, read more

7 Ways Tokenizing Traditional Assets Will Launch Security Tokens To Main Street In 2019
It may be hard to believe now, but the securitization of non-liquid assets – venture capital funds, real estate, precious metals, currency, art, sports teams – is likely to be one of the biggest stories of 2019 and beyond. read more

A fintech that lets investors own pieces of a high-priced art collection just shook up its business model, and it could be a game-changer for the digital token industry. Technology platform Swarm announced a new pricing model that requires no-upfront fees for groups looking to issue security tokens, digital securities backed by real-world assets…read more

2019 could be the year security tokens get real (estate, that is)
With the bloom off the initial-coin offering rose, it’s easy to think any kind of digital token would be a tough sell in the near future. But the folks at Breaker see things differently, suggesting 2019 could be the year security tokens really take offread more

$66 Million Building to Be Tokenized on Ethereum Blockchain in Record Deal
CP plans to tokenize some $260 million in four private real estate and debt transactions, starting with a WeWork-occupied building in downtown Miami, Florida. Announced Tuesday, the firm intends to sell tokenized shares of the building, valued at $65.5 million, likely the largest piece of real estate to be financed this way to date… read more

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