Good Progress
DigiShares is making good progress. Over the past month we have added several new white-label partners who are initiating tokenization activities in their own country. Recent clients work with equity crowdfunding, real estate, and other types of assets. They are based in the US, Europe, and Africa. Several of these will be announced in future newsletters.
At the moment we are seeing very significant interest in our white-label tokenization platform. Our recent partnership with Polymath has spurred further interest and within the next few weeks we expect to announce a partnership with another industry leader. One of the great benefits of the security token industry is that everyone collaborates on developing the value proposition, putting together the pieces of the ecosystem, and improving the joint marketing into the traditional financial industry.
For those that do not know, DigiShares provides a white-label tokenization platform for issuance, corporate management, and internal trading. We differentiate by having an attractive white-label partnership model, as well as sophisticated functionality for share cap table management, investor portal, OTC trading, and investor corporate management. We work with legal partners to provide a turn-key offering and can normally set up a new white-label platform within 1 month.
Protocols
Still more than 90% of all tokenization occurs on the Ethereum blockchain, despite poor performance and high gas fees. To avoid high fees, tokenization providers are forced to adopt inferior designs such as the omnibus approach to wallet management where all tokens of all investors in a single project are stored in the same wallet. This eliminates many internal transactions for transfers and trades and cuts the gas fee for these transactions down to zero. Only in the case where the investor removes his/her tokens to an external wallet, will there then be actual gas fees. The token industry is slowly converging to protocol standards that are open, flexible and inexpensive to use. As a Polymath partner, we are rooting for ERC-1400 and will also support Polymath’s forthcoming non-Ethereum based protocol Polymesh.
New Territories
One of the reasons for the sudden explosion in the tokenization space is most likely the increased regulatory openness to tokenization. More and more regulators are interested in supporting tokenization and are increasingly clarifying how securities and associated transactions can be digitized and completed without touchpoints to banks, CSDs, notaries, the tax department, etc.
DigiShares is constantly monitoring the development of global regulation and currently supports tokenization in these countries:
- USA: primarily out of Wyoming and Delaware
- Singapore
- Switzerland
- Liechtenstein
- Estonia
- The UK
- Germany
More countries are being added to the list every month. We are involved in dialog with regulators in several countries in order to fast forward the regulatory process. If you are interested in our help for this, please reach out.
In those countries where tokenization is not yet fully legally clarified, there are other options for how to proceed. One is to use the DigiShares solution without tokenization and just use it to manage uncertificated shares – essentially the share cap table then determines the ownership of the shares and it will be managed by the company admin via the DigiShares platform. So, investors will initially not get tokens and will have to wait for legalization before these can be issued. The other solution is to work with another instrument such as debentures or bonds. These are less demanding on the regulatory side and possible in many more jurisdictions. However, the investor interest may not be as high as for pure equity.
« The security token market cap grew by over 500% in 2020, and the best is still yet to come. I believe this number will continue to grow significantly, reaching over two billion dollars by the end of the year. As larger institutional firms continue to enter into the security token industry, I think we’ll see funds enter this space in a big way in 2021. I predict that over $100M will be raised by security token offerings this year. Worldwide exposure to real estate, private equities, and the hundreds of other security token use cases including art, luxury cars, and sports teams is now possible»
The Security Token Industry in 2021
