⚡️ Hey Zeus Fans! Every week we share the latest news in the crypto and tokenized assets industry, with our comments and thoughts on why it’s important to us, and its users! Heres what’s been going on recently:
1. The Current State of Blockchain in Investing
As the adoption of blockchain gathers pace in the banking, financial services and insurance sector, many experts believe that blockchain technology is still in its early stages. Clients are still trying to determine the positive use of the technology and are learning how to make it useful for their businesses and themselves. So we have decided to write a piece on the current state of blockchain in investing, to help provide more insight to those who may not yet understand the full potential of blockchain technology.
Q: What's the state of blockchain in investing today?
A: Blockchain is at an inflection point now: according to the PwC’s 2018 survey of 600 executives from 15 territories, 84% say their organizations have at least some involvement with blockchain technology. The investment industry is not being left behind, from crypto funds to new alternative assets, we can see the next evolution step of the industry, leading to a truly global world of investment opportunities that transcends borders and tariffs.
Q: What's the #1 trend that will shape blockchain in investing this year?
A: We previously saw the rise of ICO’s help startups raise money, however most did not comply with securities laws. Still, this new method of financing helped lead the way to the idea of using the blockchain to offer digital assets that are backed by a real-world asset, and simultaneously be as easily transferable as cryptocurrency. And this is where security tokens, or asset tokenization comes in to play. Many believe this to be the future of blockchain investing, as it gives investors the opportunity to invest in assets at a global scale 24/7.
Q: What's the #1 challenge to blockchain adoption in investing?
A: We’d point out three major pain points we faced: banking, regulation, and volatility. It is quite a task for any crypto-related entity to open a bank account without running into the compliance and transactional delays in day-to-day operations, which is a result of the bank licensing requirements and lack of industry regulation. Regulating the space is a hot topic, given the anonymous nature at the heart of blockchain. Some countries are embracing the new technology faster than others, but this creates the legal instability for the industry. High volatility is another deterrent, especially for institutional investors.
Make sure to read next week’s newsletter for part two of the current state of blockchain in investing where we will talk about it’s benefits and the future of blockchain in investing!
2. World’s First Tokenized IPO on a National Stock Exchange
In one of our previous newsletters, we touched base on MERJ Exchange’s big accomplishment of being the first to list a regulated security token on a national stock market. And now, the national stock exchange of the Seychelles, has announced that the digital initial public offering (IPO) is live! This now marks the first ever blockchain-based IPO, selling tokenized shares in its equity to investors around the world. Just before the launch, MERJ had teamed up with Globacap, a digital capital rasing platform, U.S. broker-dealer Jumpstart, and custodian Prime Trust. According to the details of the MERJ Security Token Offering, MERJ is issuing 1,652,893 new shares priced at $2.42 per share with a target of raising $4 million. MERJ has also stated that the sale brings its valuation to $25 million. It will use the Ethereum blockchain for tokenizing these shares because the company has stated that at this time “it is the best supported protocol for these purposes.”
“These novel financial instruments are here to reshape the financial industry for years to come. MERJ provides the regulatory framework necessary for investors globally to access these markets in a safe and compliant manner.” - Edmond Tuohy, CEO of MERJ Exchange
Tokenized stocks are digital assets representing real world shares in a company. The use of blockchain technology, will allow for the easy transfer of assets between buyers and sellers, thus reducing costs. Because they are classified as securities, regulatory hurdles have so far prevented bourses from launching such products. However, this development potentially marks the beginning of the rise of asset tokenization, and is providing a big stepping stone for other institutions to follow. MERJ’s IPO also represents a significant milestone for the growing digital asset class, as it offers investors unique opportunities never before seen in financial markets. Tokenization of assets can also be applied to different financial instruments such as equities and bonds, real estate, fine art, and much more!
3. Franklin Templeton Launches a Token
Franklin Templeton Investments, a multi-billion-dollar asset management company has announced that they will be using the Stellar blockchain to launch a tokenized money market fund. The token is constructed to maintain a stable price of $1.00 and aims to issue a distribution every year. Franklin Templeton seeks to offer a government money market fund to investors, which can be seen as a safer investment that maintains value while generating a higher return than, perhaps, a savings account. Franklin Templeton, known for mutual funds, is trying to make operations more efficient with “blockchain,” which the prospectus describes as follows:
“In traditional blockchain networks, copies of the blockchain ledger are stored in a decentralized manner on computers across a peer-to-peer network. Users of the blockchain network maintain a copy of the ledger with all copies of the ledger synchronized through a consensus algorithm. Protocols included in the source code govern the rules, operations and communications of the underlying blockchain network, including the validation of new blocks that contain an updated ledger reflecting new transactions.”
There is now an increasing number of traditional finance firms that are entering the industry of asset tokenization. Due to regulatory compliances, many are entering through the use of security tokens. Compared to ICOs, Security Token Offerings (STO) declare itself as a securities offering, meaning it must abide by its jurisdictions securities laws. The news itself is relatively unnoticed by many, despite the significance of the issuance. This is perhaps one of the first big steps into the world of asset tokenization, and helps pave the way for a potential influx of asset managers introducing the concept of tokenized securities to their large market of potential investors.
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