The current market of crypto assets is composed of tokens without any smart contract (i.e., cryptocurrencies) and tokens with a smart contract. This market has grown over the past year to roughly half a trillion dollars, which is still small compared to other asset classes. However, as the regulators classify existing cryptocurrencies and tokens, the market continues to grow.
Security tokens will be leading this disruption. We foresee that the tokenization of all sorts of existing assets — fiat currencies, public and private equities, loans, bonds, real estate, commodities, derivatives — is the natural first wave. Digital tokens that are backed by conventional assets will be part of the next generation of capital markets. The issuance of crypto assets and the ability to exchange them with any other digital asset 24/7 with considerably less frictions will be the standard in the redesigned capital markets. The main elements of the redesigned capital markets for crypto assets will be:
- Open 24/7
- Automated compliance
- Fractional ownership of crypto assets
- Reduced issuance, trading, and post-issuance costs
- Rapid settlement of trades
- Increased liquidity and market depth
- Asset interoperability
- Transparency and cryptographic privace
By tokenizing private securities the market will be dematerialize unlocking trillions of dollars, a value that is currently blocked to serve and support the inefficiencies and risks of the current Capital markets structure. Counter-party risks will be mitigated, costs will be substantially reduced, and security will be increased through transparency. With blockchain banking the digital collateral records are used to transfer ownership of baskets of securities, without having to move the underlying securities from one custodian to another. Market participants can redistribute liquidity more effectively and more cost-efficiently and at the same time enhance regulatory transparency of collateral chains, and mitigate systemic risk by enabling orderly default unwinds.
The global real estate market, a traditional asset class that has been growing due to demographics, urbanization trends, and growth in emerging markets, has an estimated of $217 trillion USD. There are already several real estate tokenization ventures that are focused on unlocking value and bringing all elements of the redesigned Capital markets to all stakeholders of real estate.
The global commodities markets are another large assets class that has several inefficiencies especially, related to provenance and authenticity. The tokenization of commodities, has been one of the earlier asset backed token ventures. Gold backed tokens and diamonds as an alternative investment class, are two of the examples.
LCX, the Liechtenstein Cryptoassets Exchange, is a new blockchain ecosystem:
- secure while introducing new standards for regulatory transparency and reporting
- technology driven while delivering a customer centric client experience
- focusing on crypto assets while offering the full set of blockchain services
The initial product is LCX Terminal, an advanced crypto trading desk to trade on all major crypto exchanges within a single interface. LCX is planning a compliant security token platform for issuing, storing and trading of cryptocurrencies, tokenized securities and digital assets — after necessary regulatory approval has been obtained.
LCX will foster the adoption of crypto by helping financial institutions and professional investors understand the potential blockchain holds to ignite global economic reform and financial inclusion.
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