Asset-backed tokens are blockchain-based units of value that are pegged to real-world assets, such as company shares, real estate, diamonds, or commodities etc. They represent a large subcategory of security tokens and allow users to hold ownership rights over a physical and tangible asset in a digital form. Recently, the US Securities and Exchange Commission (SEC) released a new document that defines digital assets and elaborates on how issuers and investors should treat them. The regulator’s framework is regarded as an analytical tool to determine which digital assets behave as securities and fall under SEC’s radar. When a fully operational legal framework is developed around security tokens, they might slowly but steadily replace many of the traditional trade operations by bringing more automation and transparency.
Even if asset-backed tokens are an important type of tokens and they represent real physical assets, investors are still switching them with security tokens. The reason behind is the level of automation, security, and transparency, and also the fact that the markets become more accessible to investors in any form. Many experts underline that the traditional markets will adopt tokenization at a global scale, which will form blockchain-oriented ecosystems fueled only by security tokens.
Tokens are backed by real world assets and it is quite compatible to the gold standard that existed determining the value of paper currencies. Since one of the strongest driving factors for tokenization is enhanced liquidity, the first class of asset-backed tokens belongs to assets that are known for limitations in liquidity – derivatives, real estate, collectables and private equities. These assets are easily worth trillions of dollars but they are stored without transactions as hedges against inflation.
Some relevant examples of asset-backed tokens are Diam and diamDEXX which backed by physical diamonds which was built on a trading ecosystem that allows professional and retail investors to purchase real physical diamonds with Diam coins. Diam coins are audited by the International Diamond Exchange (IDEX) and have issued more than $150 million worth of diamond-backed tokens.
Every new type of coin in crypto markets opens new insights and puts a new perspective in front of investors. Let’s wait and see which will be the main player of this limitless investment environment. We will touch on more points about the following steps of disruptive players in the cryptocurrency markets in the following articles. For any further questions, please reach us via firstname.lastname@example.org or visit our CryptoIndexSeriesTM Platform for a better analysis of the crypto market space.
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