Digital Securities
A Global Perspective – United Kingdom Edition
With the year, and decade, coming to a close, we at securities.io thought it prudent to gauge industry sentiment as it stands on a global scale. What is the current state of the digital securities sector? Is it better today than it was yesterday? Maybe those ‘in-the-know’ feel as though strategic work still needs to be done.
These are all queries that many may have, including us as securities.io. With this in mind, we have reached out to various representatives within the sector. Each hailing from differing regions of the globe.
The following commentary sheds insight into their thought processes, and how regulatory environments may shape market perception.
Global Influencers
Africa, Asia, Europe, North America, and the United Kingdom are the regions which we have decided to look at on an individual basis.
The following companies and their leads have taken the time to share their thoughts.
This edition will focus on Smartlands (U.K.), with subsequent entries into the series being published in the coming weeks.
Penny for your Thoughts?
Our methodology was simple – ask the same 5 simple questions pertaining to digital securities to 5 CEO/Managing Directors from around the world.
The goal? Gain insight into the variances in perception and adoption of the sector, based on geography; something we feel is an important metric, given the potential of the sector to influence FinTech on a global scale.
United Kingdom – Ilia Obraztsov, CEO of Smartlands
Since being founded in 2017, Smartlands has maintained operations in London, England. From here, CEO, Ilia Obraztsov oversees the development, and deployment, of their Stellar based platform as the company works towards a goal of tokenizing $1 billion in assets.
To date, Smartlands has established themselves as a leader in the industry, with multiple successful STOs under their belt.
In your opinion, what represents the largest industry achievement/hurdle cleared, to date?
One of the most significant achievements to date is that the concept of compliant security tokens (digital securities on the blockchain) has finally been defined in legal terms on both sides of the Pacific and most markets the world over. Particularly, a recent panel of lawmakers concluded that under the UK jurisdiction digital assets are now property. As you can imagine, being a UK-based platform for asset tokenization, Smartlands wholeheartedly welcomes the move. Digitalization of securities is gaining regulatory traction, thus lowering the associated risks for all participants in the space. Leading government and market institutions have validated the UVPs (ultimate value propositions) of security tokens to the extent that allows us to claim with certainty that the process of digitizing all securities is both inevitable and irreversible.
This realization supported by businesses, regulators, and independent entities is crucial in light of the initial blockchain promise, which we are now attempting to uphold; today the ‘utility' of utility tokens leaves very little room for interpretation and speculation – we all know what they are, and what purpose do they serve, and something completely different from the purpose behind the security token ecosystem.
With the aforementioned achievements laying a foundation for the industry, what remains as the biggest obstacle moving forward?
We now know what security token is and how it differentiates from the other types of investment vehicles and financial instruments. However, when it comes to what can be done with it, and where, the challenge is still there. What's lacking in most jurisdictions is decisiveness on the part of regulators. We still need more clarity, we need various protections and guarantees that would allow the industry to proliferate and flourish.
The re-centralization vector is another alarming sign. The investor community is not yet ready to operate within the trustless environment. We have to admit it and learn to deal with multiple intermediaries continuing to carry custodial and some other functions, which more or less runs counter to the original message of the blockchain technology.
Another challenge is building general awareness about asset tokenization and how it works. That it’s not a new type of investing, it’s about adding value to the existing model – enhancing speed and security, letting more people in. But it’s more a question of time, rather than an obstacle.
With regards to ‘friendly’ regulation and government acceptance, have you noticed any countries leaving the rest behind?
Of course. For instance, in October the Liechtenstein Parliament passed the Token and TT Service Provider Act (the “Blockchain Act”) making Liechtenstein the first country to have a comprehensive regulation of the token economy. Many other states are enacting progressive regulations focusing on civil law issues in relation to client protection and asset protection, adequate supervision of the token economy, and establishing additional measures to combat money laundering.
Definitely, the UK, with its regulatory sandbox experience leading to one of the clearest and best-articulated rules in the space. Lithuania, Singapore, and others – again, many governments embrace the new culture and become more and more open for innovations on the digitized securities front.
Much has been made about the transformative capabilities of digital securities. With the potential to affect change in many industries, which do you feel stands to benefit the most from the digital securities sector?
Literally, any industry or asset class can and should benefit from the many conveniences tokenization brings to the table. We can tokenize shares of previously illiquid assets (commercial/residential real estate), facilitating higher liquidity. We can stave startups off the current toxic culture of unrealistic valuations and subsequently failed fundraisers and turn them onto the next-gen modes of crowdfunding via direct, public, and private sales of tokenized shares. We can help SMEs access cheaper capital without having to kneel before conventional lenders. We can tokenize the entire Green New Deal and all of its green energy projects – for profit, and non-profits – putting humanity in charge of its transformation for a sustainable future.
We can completely reshape financial markets by tokenizing large capital funds, help investors achieve higher diversification and better control over their portfolios, ultimately providing every citizen with a toolbox for becoming ‘their own pension fund'.
Looking forward, where along the growth trajectory do you see digital securities in the next two, and five, years?
In 2 years, we hope to see a finalized landscape for trading security tokens on a global scale. After all, greater liquidity and unlimited divisibility of security tokens remain this instrument's key advantage, but it's nothing without the ability to trade quickly, transparently, globally, and on the cheap. All this will happen once security tokens are recognized on the government level and become as routine as the operations with your checking account – something that I see happening in about 5 years.
Conclusion
Well there you have it! As 2019 is about to wrap up, there is a clear trend evident within the sector – a positive one. While many hurdles have been met and cleared, there remain many more on the horizon. Despite this, the potential that digital securities hold to reshape FinTech remains as tantalizing as ever.
We will touch base in a few months to re-gauge industry sentiment with a new set of influencers from around the world. Until then, stay informed by frequenting securities.io!
