Understanding the Concept of Security
When we talk about security, we are referring to a type of financial instrument that holds value and can be easily traded. It is important to note that securities involve investments and the anticipation of making a profit. While many digital tokens in the modern economy are classified as securities, they may not possess all the traditional characteristics of a security.
One key process related to securities is securitization. This process involves bundling the cash flow generated from various assets, such as obligations, and selling them to investors. By doing so, asset holders gain access to liquidity, while investors can tap into the value of these assets. Securitization is a method commonly used to create traditional securities. It is also relevant in certain scenarios involving security tokens and the emerging digital asset finance processes in the NFT and DeFi spaces. As a result, securitization offers opportunities for investors and enhances liquidity in the marketplace.
Security tokens, on the other hand, are specifically designed to divide the ownership of an asset into fractions. They serve a similar purpose to traditional securitization by allowing owners of illiquid assets to access their investments. However, security tokens are typically used to divide the value of high-value assets, rather than pooling together multiple low-value assets.
Author: Gunnar Jaerv is the chief operating officer of First Digital Trust — Hong Kong’s technology-driven financial institution powering the digital asset industry and servicing financial technology innovators. Prior to joining First Digital Trust, Gunnar founded several tech startups, including Hong Kong-based Peak Digital and Elements Global Enterprises in Singapore.
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Security
Understanding the Concept of Security
When we talk about security, we are referring to a type of financial instrument that holds value and can be easily traded. It is important to note that securities involve investments and the anticipation of making a profit. While many digital tokens in the modern economy are classified as securities, they may not possess all the traditional characteristics of a security.
One key process related to securities is securitization. This process involves bundling the cash flow generated from various assets, such as obligations, and selling them to investors. By doing so, asset holders gain access to liquidity, while investors can tap into the value of these assets. Securitization is a method commonly used to create traditional securities. It is also relevant in certain scenarios involving security tokens and the emerging digital asset finance processes in the NFT and DeFi spaces. As a result, securitization offers opportunities for investors and enhances liquidity in the marketplace.
Security tokens, on the other hand, are specifically designed to divide the ownership of an asset into fractions. They serve a similar purpose to traditional securitization by allowing owners of illiquid assets to access their investments. However, security tokens are typically used to divide the value of high-value assets, rather than pooling together multiple low-value assets.
Author: Gunnar Jaerv is the chief operating officer of First Digital Trust — Hong Kong’s technology-driven financial institution powering the digital asset industry and servicing financial technology innovators. Prior to joining First Digital Trust, Gunnar founded several tech startups, including Hong Kong-based Peak Digital and Elements Global Enterprises in Singapore.
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