Home » Topics

Security tokens

Security tokens are securities that represent a digital twin of an asset.

What are security tokens?

Security tokens include all cryptographic tokens that serve as investment vehicles for their holders and are classified as regulated securities. They grant their holders rights to the equity or debt of assets. These rights are comparable to those of a stock or debt security holder (e.g. claims to dividend-like payments, codetermination, repayment claims, interest).

The holders can thereby participate directly in the performance of a company. Since the issuance of security tokens is associated with significant regulatory hurdles, the risk of fraud is particularly low with these tokens.

Security tokens are securities in the sense of Art. 4 (1) no. of Directive 2014/65/EU (MiFID II) and therefore subject to securities regulation. On the European level security tokens are subject to the DLT pilot regime as so-called DLT financial instruments (tokens for stocks, bonds, money market instruments and fund units under certain conditions).

Characteristics of security tokens Figure 1: Characteristics of security tokens

What security tokens are there?

Security tokens can be used to grant rights to both liquid and illiquid assets:

  • Similar to classic securities, security tokens can grant rights to liquid assets such as stocks, debt securities or currencies.
  • In addition, the fractionalization of security tokens makes it possible to grant rights to illiquid assets for which there is not yet a liquid secondary market. Examples of such illiquid assets include alternative investment funds (such as private equity funds), real estate, infrastructure projects, and collectibles such as art.

Feel free to contact us!

Julian Schmeing / author BankingHub

Julian Schmeing

Partner Office Munich
George Stylianou / author BankingHub

George Stylianou

Manager Office Berlin
Philipp Kerber / author BankingHub

Philipp Kerber

Senior Consultant

Articles on the topic

Abstract space concept image as metaphor for electronic securities and the choice of register solution

Electronic securities and the choice of register solution

How is the market for electronic securities and technical solutions developing? Is scalability the main differentiator? In cooperation with tokenforge, we take a look at the current development of the market for electronic securities and technical solutions for maintaining a crypto securities register.

Weiterlesen »

Crypto crisis: the end of Bitcoin and other cryptocurrencies or a wake-up call for stronger regulation?

The crypto debate: Is the crypto crisis the end of Bitcoin & other cryptocurrencies, or a call for stronger regulation? In this interview, Dr. Nils Bulling, Head of Strategic Innovation, Ecosystem & Digital Assets at Avaloq, shares his personal view on the current crisis in the crypto market and his predictions of how cryptocurrencies such as Bitcoin could develop in the future.

Weiterlesen »

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

BankingHub-Newsletter

Analyses, articles and interviews about trends & innovation in banking delivered right to your inbox every 2 weeks