Equities and securities traded on public markets have existed for centuries. The first financial markets appeared in Northern Italy during the Middle Ages with credits and trade rights traded between merchants.
Later, during the Age of Discoveries, these kinds of activities thrived in the Netherlands as well, most prominently used in order to fund commercial expeditions in Africa and Asia; the ‘IPO’ of the Dutch East India Company is perhaps the best example of the importance the stock market had on the community which it served.
Nowadays, financial markets are an important backbone of the international economy. As of February 2017, the total capitalization of stocks traded around the world was 69 trillion USD, roughly 100% of the world’s GDP. The total amount of securities in circulation is several times this amount; debt, for instance, is about to reach 250 trillion USD, over three times the world’s GDP.
Image Rights: Visual Capitalist, ‘The Money Project’
There are several reasons behind a company’s decision to do an IPO (Initial Public Offering), and/or seek funds from regulated markets.
Some of these include:
- Obtaining cheaper access to capital.
- Increasing exposure, prestige, and public image of the company.
- Creating multiple financing channels through equity creation, debt emission, and more.
Obtaining cheaper access to capital is by far the most important reason, enabling a company to raise capital at low costs, thus funding its expansion. A company without broad access to the financial markets is a company with limited potential.
Although there are numerous advantages to being listed on a stock market, only few companies achieve this goal. This is due to some of the downsides the process includes:
- Significant legal and accounting costs.
- Requirement to publicly disclose financial and business information.
- Time, effort, and attention required to the management of the company.
For all these reasons, only the largest companies get access to the financial markets, leaving many SMEs (Small and Medium Enterprises) without a chance to raise additional capital from them.
This could soon change, thanks to blockchain and tokenizing securities with aXpire’s CoinBX.
The main advantages to tokenizing securities include:
- Lowering the costs spent in order to get listed (SMEs will be able to easily access capital markets for the first time ever).
- Being traded 24/7, everywhere in the world, with a market open to everyone (today, in order to buy an American stock, an investor needs to have access to, for example, the NYSE or NASDAQ, and this is not always possible).
- The possibility for smaller investors to be able to invest in the company they want, thus becoming an important part of capital markets, ensuring a return for them without the interruption of any intermediary.
- Lowering the cost of capital for companies seeking it.
The last point is by far the most important one, and could start to revolutionize the economy as we know it; investments are decided depending on the IRR (Internal Rate or Return) or NPV (Net Present Value), and these figures are either dependent or compared to the cost of capital.
The lower the cost of capital, the higher the number of projects can be invested in. The more successful projects launched, the higher the benefit for the economy in terms of jobs and goods/services produced.
The potential is enormous and could trigger an economic revolution yet to be seen, by financing and empowering companies that deliver a true value to the community and their investors.
Assets worth hundreds of trillion of dollars could be tokenized in the coming years, all on the blockchain!
In addition to this, several illiquid industries could be able to speed up development as a result of their own tokenization. This could for example impact startups. Opening up startups to retail capital would help many more companies get funds enabling them to thrive, boosting the economic yield and innovation. This is currently not possible due to accreditation laws and the high barriers to entry that financial markets have.
How is CoinBX planning to be part of the STO revolution?
The plan is simple; aXpire will allow Security Token Offerings to be held on its fully compliant platform, CoinBX, empowering SMEs, startups, and community projects altogether.
aXpire via CoinBX works with partners with the utmost expertise on the legal, tax, and auditing aspects of tokenization and can provide a turnkey solution to anyone looking to tokenize their value.
The absolute goal is to connect capital seekers with investors all over the globe, without any of the archaic restrictions traditional finance markets experience. Once you realize the immense value security tokens will bring, then it all gets very exciting.
Some of the multiple advantages to STOs partnered with CoinBX can be clearly seen with the flowcharts below.
How to raise capital (outside of the banking circle) before STOs & aXpire’s CoinBX
How to raise capital (outside of the banking circle) after STOs & aXpire’s CoinBX
STOs enable even the smallest companies to access the financial market. This is unprecedented, and the benefits are immense.
What can be tokenized?
Literally everything of value. Yes, everything. Tokenization of assets has already begun, with expensive houses being divided into several tokens and sold in alternative investment opportunities. This is just one of the many applications of tokenization, however.
It is possible to tokenize:
- Real Estate
- Commodities
- Equities
- Debt
- Derivatives
- And so much more (any contract with economic value)
So, are you:
- A startup looking to raise funds?
- An SME seeking funds to expand?
- A smaller investor looking for new opportunities?
If so, become part of the STO revolution and get in touch with aXpire.io by emailing info@axpire.com!
This article was written by aXpire community member Gianluca via MatchBX.io