Digital Securities Sentiments (Silver Linings) in Covid-19 Dark Cloud
6 May 2020 — It’s been four months since the Covid 19 case was first identified in Wuhan, which has resulted in a global ongoing coronavirus pandemic. Many businesses across different sectors have not been sparred and their economic activities being disrupted, even halted. Share markets have crashed while oil prices have plunged to an unprecedented level.
According to the latest Bain’s Situational Threat Report (SITREP) Index, it is currently at Level 7, where businesses should activate second-level contingency procedures that include separating essential operations and services, focusing on high-priority customers and clients, and implementing operational and financial preparations consistent with a two-to-three-quarter recession.
But what are the current sentiments among the digital securities players amidst the current pandemic? Well, quite a few hits actually.
Positive Sentiments Among Peers
Ilia Obraztsov, CEO at Smartlands recently mentioned that tokenised credit products and blockchain-based fractional ownership in equity shares/assets are going to have a major impact on the way small merchants access capital in the post-pandemic world, as SMEs are going to be struggling to raise capital from traditional banks. Read more
In addition, Dave Hendricks, CEO of Vertalo shared “The suspension of paper-based certificate handling by the DTCC has left the status of many trades in limbo. With rule exceptions for Transfer Agents now in place under SEC guidance, some paper-based transactions may not be processed for weeks if not months. Where does this leave the affected broker-dealers or investors? We do not know. However, we do know that digital or tokenized shares would not be affected, as they are not subject to a single point of failure mechanism like centralized office-based paper processing.” Read more
Industry peers like Jeff Dorman, CFA, the chief investment officer at Arca, believed that digital assets are more recession proof than we may think. Read more; while Victor Zhang, CEO and co-founder of AlphaWallet said that the pressures of coronavirus may open the doors for tokenization of assets. Read more
Third-party independent custodian is the way to go!
On a-not-so positive news recently, (but something which a great lesson can be learnt from) security token trading platform Openfinance threatened to delist all tokens and suspend trading next month unless issuers cough up more funds to cover its costs. Kyle Sonlin, CEO of Security Token Market told CoinDesk that Openfinance closing its security token platform would be “a loss for the industry,” particularly in the U.S. He continued “It’s worth noting, however, that these security tokens can simply be self-custodied and eventually moved to another platform, which is a testament to the functionality and efficiency of security token technology.” Read more
While it’s a great assurance from the CEO himself that the security tokens will not be affected, wouldn’t it be safer if one should hold their digital securities with a third-party independent custodian, similar to traditional assets instead of high risks self-custody or with the issuer provider or exchanges? Then we won’t have to worry even if the firms were to go under.
In summary, I am an optimist and I believe the water is always half full, if not completely full. While some may described the pandemic as “the greatest economic crisis since WWII”, I am definitely more optimistic about the challenges brought about by the ongoing COVID-19 pandemic. I believe that we are the creator of our own destiny. Instead of wasting energy over worrying what’s going to happen to us during this pandemic, wouldn’t it be more productive to take the bull by its horn and think and work differently?
In my opinion, digital securities will definitely rise above this crisis. Let’s put this simply. One of the pros of raising funds through STOs is that it is less expensive. In times like this, most are very careful with money. Inexpensive is therefore good for the issuer; less money used to raise funds means, less it needs to raise and more funds for the company to use to expand. Secondly, investors are more careful in their choice of investments and with the benefit of security tokens allowing fractional ownership, this makes it more affordable and thus attractive for investors, especially at this time.
In conclusion, no matter how bad the current situation is, we shouldn’t lose hope as there are always silver linings that we can look forward to. I will leave this with you: Crisis, 危机, in Chinese is composed of two characters. If we were to separate the characters and interpret each character on its own, the first character means danger (危) while the second means opportunity (机). Therefore, let’s stay positive and find the opportunity, the silver lining, and open ourselves up to the potential for global post-traumatic growth.
#blockchain #propine #digitalsecurities #securitytokens #tokenisation
Originally published at https://www.linkedin.com.