Securitisation is the process whereby an illiquid asset is transformed into a security. As a security, it is now a fungible product that holds some monetary value, and it can be sold to investors.
Securities are created by an issuer and they represent a share of some assets, which an investor can purchase for a specified rate of return. This creates liquidity in assets by opening them up to investors – when they would have previously been unavailable for purchase.
Blockchain brings a wide range of benefits to the securitisation process – for both financial and security reasons. Blockchain technology streamlines the securitisation process to bring maximum efficiency, helps to keep costs low and transparency high, and provides regulation and security that offers peace-of-mind to investors.
The enhanced safety and lower costs associated with securisation on the blockchain encourages interest from more investors, because previously high-risk securities now have more transparency around them. It’s expected that this will cause trading volume to rise and costs to improve, with investors able to make sounder decisions without the worry of fraud.
We’re here to break down the technical terms to give issuers and investors a greater insight into the process. If you have any other questions, just get in touch.
Security tokens – newly issued securities that operated on a distributed ledger.
Tokenised securities – a representation of a financial product that already exists.