The Advantages of Tokenization for Structuring Investments
Tokenization can provide several benefits to an international investment structure, offering new
opportunities and efficiencies in the financial landscape. Tokenization refers to the process of
converting traditional assets, such as real estate, stocks, bonds, or other financial instruments, into
digital tokens on a blockchain or distributed ledger technology (DLT) platform.
Here are some ways international investment structures can benefit from tokenization:
Global Fundraising Opportunities:
Tokenization allows international businesses to unite capital
from a global pool of investors without the geographical limitations of traditional fundraising
methods. This broader investor reach can not only attract more significant number of investors, but
more importantly streamlines the operation into fluid pathways to conform capital.
Fluid Dividend Distribution:
Through a token contract on a blockchain, project managers can effortlessly send periodic
dividends directly to all investors, in ONE easy transaction. When funds are transferred into the
token contract, they automatically disperse equally into the existing number of tokens, effectively
giving every single holder, their proportional part of the token’s proceeds.
Certainty in Asset Value (Transacting and Auditing):
With every transaction of the token’s payout being transparent on its blockchain record, the precise
value of a token’s yield is no mystery. At any given moment, the token contract can be ‘‘audited’’,
with real data offering a transparent, traceable snapshot of the digital asset’s performance. This
allows for a clear view of the asset’s value, allowing for fair trades based on immutable data. This
transparent audit trail provides regulators, investors, and stakeholders with a clear view of asset
ownership, transfers, and transaction history, enhancing trust and accountability.
Regulatory Compliance and Security:
Tokenization can facilitate compliance with various
regulatory requirements by embedding them into smart contracts. Additionally, blockchain's
inherent security features help safeguard against fraudulent activities, enhancing the integrity of
the investment structure.
Asset Tokenization Flexibility:
A wide range of assets can be tokenized, including real estate,
stocks, commodities, art, and more. This flexibility provides investors with access to diverse
investment opportunities across different sectors and geographies.
Secondary Market Development: Tokenization can foster the development of secondary markets
for traditionally illiquid assets. These secondary markets enable investors to trade tokens after the
initial investment, increasing liquidity and attracting more investors to the asset class
Enhanced Fractional Ownership: Tokenization enables the division of assets into smaller, tradable
units, which allows investors to own fractions of high-value assets that were previously out of
reach. This fractional ownership enables portfolio diversification and risk management, as
investors can spread their investments across multiple assets.
Interoperability and Standardization:
Tokenization often follows established blockchain standards,
making it easier to transfer and trade tokens across different platforms and ecosystems. This
interoperability can foster a more seamless international investment landscape, reducing friction
and increasing accessibility for investors.
Real-Time Settlements: Tokenization can streamline the settlement process by removing
intermediaries and automating transaction execution through smart contracts. This enables real-
time settlements, reducing counterparty risks and speeding up the investment process, especially
across different time zones and international borders.
Cost Efficiency:
Tokenization eliminates the need for various intermediaries in traditional
investment processes, which can significantly reduce operational costs. This cost efficiency is
especially beneficial in international investments, where cross-border transactions and compliance
can be expensive.
24/7 Market Access:
Unlike traditional financial markets that operate on specific schedules,
tokenized assets can be traded 24/7, providing continuous market access for investors globally.
This accessibility enhances liquidity and responsiveness to market fluctuations.
In summary, the structural advantages of tokenization in international investment structures revolve
around increased fractional ownership opportunities, enhanced liquidity and accessibility, cost
efficiency, transparency, security, and the potential to open up new avenues for investment. By
leveraging blockchain technology, tokenization can transform the traditional investment landscape,
offering numerous benefits for both investors and issuers in a global context.
