The influence of tokenization has been growing over the past couple of years. According to Deloitte, “The tokenization of assets refers to the process of issuing a blockchain token, specifically a security token, that digitally represents a real tradeable asset.” Industries such as financial services and real estate have already started to adopt tokenization as it helps provide greater liquidity, more transparency, and accessibility – not to mention lower costs.
As a new global token economy is being developed, entrepreneurs have sensed this opportunity and have begun to launch innovative solutions, both direct and ancillary, that will provide the foundation of a tokenized future. In this article, we will learn from one of these experts.
To learn more about tokenization and smart securities, we spoke with Artem Tolkachev, CEO and Founder of Tokenomica, a financial platform that allows for issuance and trading of tokenized assets.
1) What are the biggest challenges with tokenized securities currently?
The main problem with the crypto market was the lack of regulation that has resulted in a lack of investor protection mechanisms.
For me, it was obvious that the financial market needed a solution that combines regulation and technological tools. Basically, that’s how we had the first idea about Tokenomica. We have seen that there were already some products that offered the issuance of security tokens or tokenized securities but they just didn’t seem good enough.
After that, my team started working on the ideas on what else we can offer outside the simple issuance tool. That’s when we’ve decided that we need to combine token issuance with access to the secondary market, a marketplace that would allow investors to easily participate in ongoing campaigns, and last but definitely not least back-office automatization. All in on place and working in full compliance with EU regulations.
Of course, lack of liquidity is the main problem of the tokenized securities market but it is very complex and it originates from other significant issues.
We have seen some STOs on the market as well which had the same problems that ICOs had. I believe that currently there is no clear understanding of what STO is. What is currently called an “STO” by most people on the market is just an “ICO” that doesn’t pass the Howey Test. Our understanding of what STO is and what it should be way beyond from that, so there is no standard, no definition, and no classification of what STO is. Somewhere close to this problem is the regulatory uncertainty, partially caused by the incomprehension on the market of what STO is and what it should be, so regulators are extremely careful with the basic or further development of STO regulation.
Because of the reasons I just mentioned there is no trust in STO from investors, no certainty that they should go for it. STO is usually described as a sweet spot that should attract both traditional and crypto investors but right now it attracts neither. For institutional investors, regulation plays a gigantic role, so they won’t give their money until there is legal clarity of what STO really is. Most of the crypto investors are interested in high profits in a short period of time, they are not interested in the long-term development of the project which they won’t get from an STO.
And of course, there is a quality problem. There are almost none quality STOs being launched in the industry at the moment. Most of the projects that have launched and conducted an STO up to date were based on the same principles as ICO or had an ICO before.
And all of these problems result in a lack of liquidity. But i believe that with proper regulation and positive STO cases, investors will come to the market. It’s important to understand that STO is a fundraising method, not some magic bullet that will bring money to both companies and investors with one simple move.
2) What are Smart Securities and how do they differ from traditional securities?
Smart security is a totally new kind of asset which can be traded in a decentralized way in total compliance with securities market regulations. This is achieved with the use of blockchain technology.
Smart securities combine the legal essence of traditional securities with cutting-edge technology. Smart security allows companies to reduce the number of intermediaries and overall setup costs. We aim at maximum decentralization.
At the moment, we have already excluded a central intermediary from the process and overall there are only two intermediaries left between companies and investors. On the current financial market, it is a massive win considering that currently in all forms of fundraising there are at least 7 of them involved.
Another feature of smart securities is a built-in programmable and automated lifecycle management and built-in compliance with the existing securities regulations.
3) What is Tokenomica’s competitive advantage?
When we first started working on Tokenomica, we had two main purposes: to make the tokenized securities issuance process as easy and automated as it can be; and to create the Marketplace in the secure, regulated, and compliant environment where issuers could raise capital and investors could invest their projects.
To achieve this, the company has developed an automated smart securities issuance system which encompasses the creation of tokens on the blockchain that also includes legal structuring and fully compliant features built right into the code. Automation of these manual processes eliminates intermediaries, reduces the overhead of time and resources, which leads to a significant reduction of issuance costs.
As a result, these advantages can potentially benefit investors, as the reduction of setup costs will provide companies with an opportunity to offer better investment terms. Tokenomica gives fully regulated possibilities for issuing and trading of digital securities.
So as of right now, Tokenomica is the only one-stop-shop for digital securities. Tokenomica gives fully regulated possibilities for issuing and trading of digital securities.
Tokenomica is the first platform that includes: smart securities issuance platform, secondary trading of smart securities and decentralized crypto exchange.
4) What about the technology that you use?
We have added much more value by using Waves blockchain without gas fees! It is based on smart contracts with the technology of Smart Assets & Smart Accounts.
We use Waves blockchain that covers every aspect needed for our platform: compliance embedded in a technology — Smart Account and Smart Asset technology created by Waves was specifically designed to implement compliance-related restrictions into digital assets in a fully customizable way. Easy adoption — Waves provides a wide range of tools for developers, including Waves Smart Contract Console (IDE) and a language specifically created to design Smart Assets (RIDE). No Gas and low transaction fees — transaction fees are maintained at the lowest level compared with other platforms that provide similar functionality.
5) What industries do you think will see major tokenization?
Tokenization disrupts the way we invest in assets. Process of digitizing assets, dividing them into tokens and typically selling them to investors. This innovation has the potential to disrupt industries all over the world.
Just like bitcoin is significantly changing the financial landscape, a blockchain asset tokenization can make investing in real-world assets far more convenient and efficient. Business areas already go far beyond crypto and blockchain projects.
We are already working with one of the biggest issuers of debt bonds in Europe and there are a couple of startups that are planning to launch their fundraising campaign on Tokenomica as well. Not related to crypto in any way as well. I hope that their campaigns will help us demonstrate that STO is not about crypto, it’s about using new technologies in fundraising.
Any business could tokenize their assets, like Real Estate, producing, retail, financial companies and etc.
6) Do Smart Securities remove most of the risks currently seen in other crypto assets?
We believe that it is not right to compare smart securities with what we call crypto assets because most of them have no real value.
While smart securities describe the real assets and secure value for investors. They are issued in full compliance with the EU securities regulations. So it is right to compare them with traditional securities in terms of what they provide: intermittent returns, property control, cash progress, polling benefits, and more interests.
7) What is the current state of your platform?
Tokenomica is already launched. The platform already offers businesses of any size a solution to attract capital through the offering of smart securities and get easy access to secondary markets and the Marketplace where all the past and on-going campaigns are also available.
As of today, Tokenomica allows companies to raise funds in BTC, WAVES, TUSD, EURS. For the convenience of both companies and investors, the platform offers the first regulated decentralized crypto exchange.
Even though our team has worked tirelessly during the last 6 months, this is only the first step for Tokenomica. We are already working on the improvement of Tokenomica. In October, we plan to implement a fully compliant fiat gateway that will enable users to easily trade crypto-assets for Euro and attract capital in Euro as well.
Right now, we are also onboarding corporate clients. The first massive partnership with one of the major issuers of Eurobonds will be announced by us later this month.
In the next 6-8 months, we are planning to launch the secondary trading feature that will provide liquidity to assets issued on Tokenomica.