Five Ways Financial Assets Will Be Able to Benefit from Blockchain Technology
We recently touched upon how blockchain technology has the potential to bring financial assets together in a single standardized system. To elaborate a bit more, the following are some of the benefits that such developments could yield:
1. International Market Exposure.
By integrating geographic compliance and legal restraints into security tokens, it is possible for assets to be internationally traded, issued, and purchased. Exposing financial assets to a global pool of investors may result in more accurate pricing, healthier competition in the financial markets, and increasingly diverse investor portfolios.
2. Interoperability
Financial assets still tend to be walled off from each other, which inhibits trade. Public stocks are traded and settle in broker databases that are held separately. Private securities generally reside on servers at law firms. Real estate deeds are most often found in file cabinets in homes. Assets do not interoperate or communicate with one another. By introducing blockchain, they will be able to interact smoothly, which will enhance their automation and compliance.
3. Improved Regulation
Systems currently lack much ability to provide insight into potential abuse. Blockchain technology will make it easier for fraudulent activity or any form of system manipulation to be noticed. All entries to the blockchain are lodged in a permanent ledger that is immutable and the transparency of the chain naturally facilitates the compliance of the parties involved.
4. The Option of Fractional Ownership
Blockchain tokens are uniquely divisible, which can make expensive assets such as real estate or fine art more accessible to investors through partial ownership. With an opportunity to own a nominal stake in a fine art collection or part of a hotel chain, for example, new investors will be able to better diversify their portfolios, no matter their net worth.
5. Improved Design Space
Programmable securities are expected to drastically expand the scope of what can be digitally secured. In the future, this may be the driving force behind new financial innovations, like cross-asset referencing, tokenization, and complex revenue sharing. In this vastly improved design space, our future financial markets are likely to be significantly more efficient.
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