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How Blockchain Technology Will Improve Securities Markets Posted on : Jan 18 - 2019

Much of the attention the blockchain and cryptocurrency markets received in 2017 and 2018 as waned as Bitcoin’s price has fallen about 75% from its peak. One area within the space that is growing in favor despite the broader negativity is securitized tokens.

In this case, the word securitized refers to turning blockchain tokens into legally compliant securities rather than, as some of us with finance experience would naturally infer, a bundling of assets (or tokens) to be sold as securities.

The value of all publicly traded stocks is on the order of $300 trillion. That measure doesn’t include privately traded stocks or any other security, like bonds (which exceed stocks in value) and derivatives. Reversing the nomenclature, the business of tokenizing securities has the potential to be big business.

Still, one would ask why anyone would want their securities tokenized. The logic is one that seems to me to conflict with many of the principles espoused in the crypto community, where libertarian ideas about eliminating central banks and diminishing the role of government in financial markets are pervasive. The logic for tokenizing securities is to make securities more self-regulating.

Blockchain technology allows for smart contracts that can be used to prevent ordinary investors from purchasing securitized tokens that they are not qualified to own. They can incorporate compliance with complex, international know-your-customer (KYC) and anti-money-laundering (AML) rules.

So, the technology that at times has seemed to befuddle securities regulators, could now be used to with their blessing to help protect investors by enforcing securities laws.

Dan Doney, 48, is the founder, CEO and CTO of Securrency, a 100-person startup that has already raised more than $9 million that is focused on securitized tokens. He joined me for a discussion about his firm’s work in the space. Watch it in the video player at the top of this article.

Doney is passionate about seeing his technology improve the world. “Securrency’s mission is to deploy a global, unifying financial services infrastructure that pushes capital formation out to the edges of the global economy, reduces the cost of participation in the capital markets, and enhances global liquidity.”

Security tokens have the potential to address two problems in the securities markets, Doney says. View More