Digitalization is the conversion of documents and information into electronic format stored in an unalterable, auditable, updatable format on a blockchain (secure “file cabinet”).
Tokens are digital “shares” tradeable on private or public exchanges – primary offerings or secondary trading.
The Tokens are held on behalf of the investor by a qualified/regulated institutional custodian.
All funds are held/distributed by a regulated financial institution in accordance with the investment terms.
Together they are the 21st century version of stocks, bonds, membership/partnership shares, and brokerage/investment accounts.
Tokens incorporate “smart contracts” (snippets of code) that automate an offering and associated workflow such as transfers of shares, distributions, capital table updates, etc. – with a full audit trail.
Smart Contracts are capable of handling complex structures including senior loans, A/B structures, mezzanine loans, preferred equity, GP, LPs, Members, etc.
Also, non-financial assets such as timeshares or club memberships.
Benefits include:
Fractionalization (division of large investments into smaller, individual size units) allows access to a larger pool of small investors.
Access to Investors around the Globe via the Internet.
Automated Accredited Investor vetting, KYI & AML reviews.
Automated Tax and Accounting Reports.
The software allows for potential integration of many legacy and third-party software such as property management and investor relationship programs.
Trusted data improves asset value and liquidity while reducing costs and timing of asset valuations, due diligence, and performance/investor reports.