Tokenization is mainly associated with the process of converting some form of assets into a token that can be issued, transferred, recorded, or stored on a blockchain system. According to Markets and Markets, global tokenization market size is expected to grow from USD 1.9 billion in 2020 to USD 4.8 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 19.5% (Markets and Market, 2020). Tokenization is believed to make the financial industry more accessible, cheaper, faster and easier, thereby possibly unlocking trillions of euros in currently illiquid assets and vastly increasing the volume of trade. - Author: Loha Hashimy
Advantages of Tokenization
Tokenization can overcome some pitfalls of conventional equity-raising approaches, such as routine book maintenance, long settlement times, and the related nature of issuing and signing stock certificates. Through tokenization, companies can handle their investors and responsibilities, reach a new investor, and simplify compliance obligations.
Here are some benefits of tokenization.
- Accessibility: Since the investments amounts and holding period could potentially be reduced, tokenization could broaden the investor’s base and bring more actors into the picture.
- Servicing: It is possible to set up regular dividend payments automatically and perform corporate actions digitally.
- Enhanced liquidity: Since the tokens can be traded, the investors will be able to liquidate their positions more easily than in the generic private equity setup. It might also result in easier ways to finance projects through raising capital.
- Transparency and compliance to regulation: The token transactions can be tracked through a public ledger and are only sold to professional investors that have undergone a related KYC and AML.
Liechtenstein’s Blockchain Act
“Tokens and TT Service Providers Law” (TVTG), hereby also referred to as Liechtenstein Blockchain Act, is one of the first regulatory frameworks that enables tokenization of any rights and assets. The so-called Token Container Model (TCM) is one of TVTG’s construction blocks. With this system, a token functions as a container with the capacity to hold all sorts of rights. The basic structure of tokenization is that an asset or right is represented by a token and the token acts as carrier of this value or right. If shares or equity are tokenized, they are represented by equity tokens. Equally, when debt securities, debt capital or bonds are tokenized, they are represented by debt tokens.
This model is truly helpful to understand the process and the impact of tokenization, offering legal certainty for tokenized pre-existing rights as well as for data stored on a blockchain-based system.
The beauty of Liechtenstein’s Blockchain Act is that it complies with the European Union (EU)´s regulation and as a member of European Economic Area (EEA), Liechtenstein’s registrations and licenses are passportable to other EEA/EU countries. The Blockchain Act of Liechtenstein opens up many doors for those businesses who have been waiting for a legal framework under which to run without problems. What in most other countries is difficult and challenging, is now possible in Liechtenstein. The Blockchain Act enables tokenization of any rights and assets, without workarounds, decreasing costs, time and effort spent in the tokenization process.
The Emergence of Amazing Blocks
Amazing Blocks is the first company that leverages Liechtenstein´s Token Act (TVTG) to tokenize any asset and right. To facilitate the tokenization of equity and debt, Amazing Blocks provides a holistic software solution, which has been validated by tokenizing Amazing Block’s own shares. These shares are approved by the Liechtenstein´s Financial Market Authority (FMA) as equity tokens of the company. The generated tokens can be inspected through Ethereum mainnet, which shows transparency over transactions that the company provides to the customers and to the beneficiaries.
The two software packages in place developed by Micobo (partner), are Investor suite and Tokenpad. The Investor Suite is a customizable solution that allows companies to onboard investors complying with all required KYC and AML procedures. The Investor Suite integrates multiple assets, it allows investments in multiple tokens and it also provides a dashboard for investors that seek to build a portfolio. The Issuer Tokenpad, a software-as-a-service — delivers a client-focused solution to support the tokenization of shares and other assets in Liechtenstein. It is a management software for digital legal entities in Liechtenstein, where the entire process such as investor onboarding, tokenizing shares, role assignment, security features as pause and burn etc. is supported. Liechtenstein legal entities can tokenize their equity with this solution themselves which helps in overcoming inefficient processes and allows digitizing shares. This software could also be applied to tokenize other assets and rights of Liechtenstein legal entities such as participation rights or ownership rights.
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Amazing Blocks offers a tokenization solution that enables its clients to tokenize various assets according to the Liechtenstein Token Act (software-as-a-service). The software covers both the issuance of tokens and investing in tokens. It suits the needs for tokenizing all kinds of assets (e.g. machines, cash flow generating contracts, trademarks, real estate, cars). Imagine that some asset should be tokenized. For this asset various tokens would make sense: Equity tokens, debt tokens, participation rights as tokens, ownership tokens, or any mixture of these tokens. The software of Amazing Blocks helps issuers to handle multiple assets and to issue multiple tokens for these assets. This is possible by integrating blockchain technology with the law (that is, the Liechtenstein Token Act). At the core, there is the “digital legal entity in Liechtenstein” based on “tokenized shares” which allows a very efficient foundation, a very efficient operation of the company and, thus, an efficient and flexible possibility to tokenize assets. This should now make a wide variety of tokenization projects possible, because the costs for tokenization are significantly reduced.
Interested? Then, contact us! Are you interested in what Amazing Blocks is doing? Visit our website, write an email to email@example.com, or follow us on LinkedIn or Twitter. Or provide your email address here and we will immediately send you more information.
Loha Hashimy is working as Project manager and Business Developer at Amazing Blocks. For more information, contact her via email.