For a long time, people all over the world have relied on the traditional finance sector. This sector has played a huge role in the growth of industries and economies. In a world where technology is moving faster than ever though, the traditional finance sector seems to be lagging behind. Cryptocurrencies have posted a great potential of moving the sector forward but the digital sector is still very unstable. This is at least until security tokens hit the market. These improved crypto tokens hope to combine the power of blockchain with the stability of the traditional finance sector.
For security tokens to be successful though, a lot of credibility and trust in the system must exist. Indeed, many industry experts have noted that time is overdue for a new system of moving the finance sector to the next stage. Digital securities present huge potentials because they decentralize and add versatility to the market. These securities have the benefits of the electronic world which include faster transfer, increased security and flexibility. A couple of challenges must be addressed through for the benefits to be reaped.
Challenges Posed by Lack of Regulation
In a regulated market, investors tend to speculate less. In an unregulated market though, speculation is the order of the day and there are no clear frameworks that guide investment. This is the challenge that has characterized the digital securities market. As of now, investments are made from pure speculation as there are no specific valuation techniques available to guide the market. This is why many ICOs have ended up failing for either being fraudulent or because of excessive speculation. The challenges of uncertainty are thus too huge currently in the digital securities market.
Why Traditional Markets are Lagging Behind
While the digital space is still grappling with speculation and uncertainty, the traditional markets face other kinds of challenges. The real estate, stocks, bonds, and other investment markets might still be considered safe but they are so far behind for the modern world. It is still not possible to transfer assets directly from one person to the next and there are so many intermediaries and third-parties who bring down the efficiency of trade. The limited liquidity is also becoming more apparent especially in the wake of blockchain technologies that allow big assets to be divided into viable assets. Not to mention, raising money in the traditional markets is still a challenge.
Where the Best of Traditional and Modern Markets Meet
There is no doubt that tokenized securities present the best of both the traditional market and the digital market. These securities are able to bring liquidity to the market by allowing investors to invest in broken down assets. This is especially true in the real estate market. Other than that, tokenized securities will bring the efficiency and speed of the blockchain industry to the assets market. There are numerous companies that are already working hard to make digital securities a reality. Since the technology allows for tokenized securities to be a reality, it is only a matter of time before the market goes full circle.