Custody of Tokenized Assets

by | Dec 29, 2020 | Token | 0 comments

In the past two years, regulatory agencies have set new standards and guidelines for the tokenization of assets. From issuance to custody and settlement, tokenization has dramatically improved in investor protection and market regulations. The possibility of tokenizing tradable assets, like real estate, bonds, loans, private equity, venture capital, commodities, artwork, and others, still raises questions regarding the safe storage of asset-backed tokens. 

How to Store Asset-backed Tokens Safe

Asset tokenization is already a reality in various parts of the world, and its advantages outweigh the disadvantages. Asset-backed tokens are typically issued and traded on a blockchain network. Blockchain’s consensus mechanism facilitates an advanced level of cyber-security measures, safeguarding digital assets. Digital assets are held in cold and hot wallets, which are accessed via private keys. 

Once you lose your private keys, you will not be able to access your wallet. Besides, since hot wallets are connected to the internet, they are vulnerable to hacking. Contrary, a cold wallet offers the storage of digital assets on a physical offline piece of hardware. The significant advantage of a hot wallet is instant access to funds.  

Why is Custody Important in the Crypto Space?

Risk management

A century ago, people knew that the setting apart of duties was important. It put some form of neutral check and balances in place in a process where members managed other peoples’ assets. The segregation of duties was a risk management measure before even the invention of computers. Since then, it has become a widespread, recognized practice for the financial sector. 

Since the start of the 21st Century, new questions began to arise. Can technology make this ancient risk management measure outdated? Can it offer benefits that transform the established structures and roles of financial markets? Can’t we be our own financial bosses? 

Be your bank till you make it.

Being your own financial boss is great, but up to a given point. It is incredible to brag about the cryptocurrencies you own and show off your smartphone to colleagues when you hold a few thousand dollars worth of BTC on it. It is still kind of fun if the balance reaches ten thousand dollars, but you might not brag about it to many people as before. 

When the balance hits one million-plus, I doubt whether it would be fun to even walk on the streets with the phone in your pocket at all. It isn’t very comforting to have the phone in your bedroom drawer, even if it is switched to silent mode. Now imagine the tokenized assets on your phone wallet belongs to your customer! 

Again, let us consider the traditional financial system and how it is structured. It is made up of a Central Securities Depository (CSD) for the safe-storage of assets, a Central Counterparty (CCP) offering clearing services, and to moderate the counterparty risk between traders and the securities settlement system (SSS), facilitating the exchange and delivery of securities. 

The market participants leverage these service providers for orderly trading for the welfare of their clients and themselves. They do not keep their clients’ assets as they are unwilling to be accountable for any loss. 

Institutional Infrastructure for Digital Assets

The term institutional infrastructure traditionally implies fortified doors, armed guards, body scanners, access passes, and keys. It differs from an escrow system significantly since an escrow can be executed in about five minutes on a Trezor of a blockchain lawyer. 

The use of custodial services to monitor, store, and safeguard digital assets is essential. This is why we came up with the Tokenizer Custody, creating a new marketplace with traditional security measures. We strive to build an end-to-end Defi infrastructure that will help the crypto space to thrive. We are confident that we will achieve our dreams by embracing measures like custodian services.  

Tokenizer Blockchain Banking Platform

Tokenizer is a blockchain investment banking system that champions accessible, transparent, and safe financial services. We believe that everyone deserves equal access to investment and fundraising opportunities. That is why we are democratizing access to capital for investors and fundraisers by making investing and fundraising efficient, safe, and accessible to everyone.

Are you in need of raising funds or investing in security tokens? Apply to raise funds through Tokenizer by filling this application form. If you want to invest in security tokens, sign up for a Tokenizer Investment Account today, and if you want to liquidate and trade-in Asset-Backed Tokens, we have a decentralized exchange designed for you!

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