Thomas GretherThe asset token represents real economic goods. These secure the token. This creates transparency and brings the token principle into reality. Investment positions such as the following are often behind the asset token, which is also known as an investment token:
- Real estate
- Operating assets (for example, wind turbines)
- Precious metals
- Raw materials
- Company shares
The secure security among tokens
Due to the link with real and physical counter-values, asset tokens can also be compared to securities. What the broker is for the stock exchange, the blockchain embodies for the asset token. These are decentralized networks that record, validate and execute transactions. The documentation is immutable and thus largely safe from forgery.
Shares in real assets or companies
The Swiss Financial Market Supervisory Authority FINMA defines asset token as follows: “Asset tokens (Anlage Token) are assets in the form of shares in real assets or companies. Providers promise future earnings (e.g., shares in sales or EBIT) or future cash flows (e.g., claims to dividends or interest payments).” In addition, according to the economic function, the token corresponds to, for example, a share, a participation certificate, a bond or a derivative financial instrument.
Company: Shares secure the tokens. Real estate: shares in sales as collateral.
Legal situation of asset tokens
In principle, companies can issue virtual currencies without regulation or approval. There are no big hurdles for corporate financing via initial coin offerings. However, different token types need to be classified differently. Asset-backend tokens differ from utillity tokens as follows:
- They are considered a form of equity investment.
- They can promise profit sharing and even voting rights.
- For this reason, they are also valued as forms of investment requiring a prospectus or as securities (regulated in Germany by the Securities Trading Act).
Market volume of digital assets 2019 – 2027
in billion euros | Security Tokens | Cryptos | Total |
2021 | 104 | 460 | 564 |
2022 | 172 | 598 | 770 |
2023 | 284 | 777 | 1061 |
2024 | 468 | 1010 | 1478 |
Reliable empirical values are still lacking
Various criteria determine whether an investment form is a security or not:
- The transferability
- The tradability
- Participation rights or asset rights
- No classification as an exclusive payment element
The empirical data is currently still lacking in America, England and worldwide to be able to specifically classify asset tokens as securities. As long as certain maximum amounts are not exceeded, the so-called prospectus requirement allows exceptions for certain forms of investment. The maximum investment amount is 20,000 euros. If the swarm financing is carried out via an Internet platform, the operator of the platform must have a permit as an intermediary (in this case under German law).
Asset tokens as an innovative financial service
Innovations in financial services are changing our world. For example, the invention of the joint stock company or the stock exchange in 1602. This innovation led to a democratization of the capital markets. The concept of asset tokens could be just as innovative to unlock new value and create fairer capital markets with more security.
What are asset tokens suitable for?
Around 40 percent of all assets are unbankable. For example, the luxury villa or a collection of jewels. These values are also called “bulky assets.” Crypto technology offers new perspectives for such an investment here. Through digital asset tokens, trading of any asset is possible like real estate tokens by companies called “Propvest” or others. Whether it is an old painting or a parking garage, crypto technology makes non-bankable assets available to you as a small investor.
How much do I invest in asset tokens?
Many forms of investment require a high minimum investment. For example, closed-end real estate funds, where the minimum investment usually starts at 10,000 euros. In the case of private equity funds, an investment of less than 100,000 euros is hardly possible. Of course, these sums are not available to every small investor. Asset tokens offer low minimum subscription amounts. Sometimes as low as one euro. Financial resources can be spread more easily in this way. The digital subscription route makes this technically possible.
What are the advantages of asset tokens?
The tradability of asset tokens takes place practically around the clock. The blockchain knows no closing time. Thanks to blockchain technology, it is possible to carry out manipulation-free processes in an automated manner. Token-based assets are capable of simplifying the processes of the financial and investment world in the long term. Institutional investors have also already discovered asset tokens for themselves. Banks and pension funds are taking advantage of the opportunities offered by tokenization. For example, the DAX company Security Token Offering of Vonovia.
FAQ – Frequently asked questions
Asset tokens can be purchased in token sales or initial coin offerings. Crypto exchanges do not usually offer asset tokens.
There is no universal scheme for the legal implementation of tokenization projects. The legal requirements are composed of the specifics of the subject matter. Civil law and regulatory specifics must be taken into account. For example, in the case of tokenization of medicines or hazardous waste. Here, the regulatory requirements differ from tokens to art objects or automobiles.
The risks for investors are always primarily where crypto tokens are not yet subject to regulation. Finma, the financial market regulator in Switzerland, has defined asset-backed tokens as “investment tokens” and has begun to effectively regulate them. Security has increased: “asset-backed tokens” require that there be an underlying real value. They form a fourth category after payment tokens, security and equity tokens, and utility tokens.
Find out about the company issuing the asset tokens. In most cases, it is a startup that does not have any market experience yet. Familiarize yourself with the industry and the company’s offering. This is the only way to realistically assess the return on investment. Read through the white paper that explains the business idea and parts of the business plan. Who is running the company, how serious and capable are these people? These questions also need to be clarified.
The benefits of blockchainTrading
asset tokens via blockchain also reduces the cost of each transaction. Processes are streamlined and the number of parties involved is reduced. There are other advantages as well:
- Access to trading is direct and easy: any Internet user can theoretically invest in asset tokens as well.
- Blockchains offer more transparency for you as an investor. The database for all transactions is identical. The data only updates itself via a clearly defined consensus process.
- The blockchain records and stores each transaction simultaneously on different nodes. In this way, transactions can be verified by all participants.
- Blockchains are a secure concept. It reconciles transactions before they are registered. They cannot be changed afterwards.
- Trading via blockchains increases speed and efficiency. Paper-based processes and human error are virtually eliminated.
