Digital Assets: The Future of Capital Markets

Business strategies today are converging with technology. The emergence of applications of digital assets is challenging the inefficiencies in capital allocation. How? It all started with building a digital asset based on the principle of decentralization. Thus, came Bitcoin and the concept of cryptocurrency. Since then, it has enabled digital asset holding and trading of funds from one wallet to another without a mediator.

Before talking about capital markets, let’s understand what a digital asset is. In short, a digital asset is a digital representation of any and every kind of object. As mentioned, it is a blockchain system, hence, allowing us to locate it on a digital timeline. Since its origin to the present-day scenario.

When Buterin launched Ethereum as the first asset management platform, the world was opened up to the power and capability of blockchain. As a result, it manifested into the largest blockchain ecosystem in the digital world. Ethereum allowed the creation of digital tokens on a broader scale. As well as, served a significant role in the development of NFTs and decentralized finance ecosystems.

Hence, a digital asset-based capital market aims to resolve capital requirements, international fund transfers, and asset availability issues faced by retail investors, institutional investors, and financial service providers. Additionally, it helps to eliminate inefficiencies that cost delays and unnecessary expenses. It does so, by streamlining cross-border transactions, as well as, improving and creating new securities like bonds, stocks, and shares.

For instance, German startups such as Finexity, and Exporo, are creating real estate-based digital assets. As a result, making it possible for retail investors without sufficient capital, to invest in real estate. Furthermore, digital assets let retail investors access upcoming investment categories and diversify their profiles at the same time.

Another example is the company CashOnLedger who is working on a pay-per-use model based on digital assets. Instead of investing in large operating costs, the company is leasing tractors and other industrial goods, in order to make profits. Basically, the idea is the initial machinery cost is carried out by the capital market through digital assets. Thereafter every time they lease the machine, the investors make returns.

Implemented Measures

In October 2020, a webinar featured participants from 25 countries to discuss digital securities and the future of capital markets. This, in particular, reflected how different nations have implemented digital assets in their projects.

The Bank of Thailand, for example, has successfully reduced bond settlement times from 14 days to 2 days by leveraging DLT. Moreover, they have persuaded the younger generation to invest in saving bonds. Bonds which are usually reserved for wealthy folks over 60, by promoting financial inclusion through blockchain.

Meanwhile, the Singapore Exchange issued its first digital bond using blockchain to create a pilot program. Moreover, custodian bodies and open financial services also look forward to furthering the inclusion of digital assets.

On the other hand, Hong Kong representatives seemed excited about the country’s Securities and Futures Commission granting their first digital asset holding licenses to brokers.

Alongside, the Office of the Comptroller of the Currency in the US has allowed banks to interact with crypto assets. While the Swiss are already trying to build a secondary market for tokenized securities.

The German rep brought the meeting to a conclusion with talks of the German financial regulatory authority releasing guidance for the licensed crypto custodians.

This goes to show how incorporated digital assets are in our lives. Furthermore, opens up room for further discussion surrounding the future of digital assets.

Future Potential 

As much as the financial sector is embracing future developments, it should strategize plans for the adoption of digital assets and cryptocurrency, as they rise to become the norm. Multiple cryptocurrency exchanges are already competing with Legacy financial service providers and, growing rapidly. Moreover, these platforms possess the funds and capital to execute business plans. While also offering their users the best assets. 

These developments will reach new realities when emphasized with artificial intelligence, data, and analytics. Asset managers, wealth managers, and private markets will focus more on client-driven transformation. Complete exchange automation using blockchain technology will further help companies to eliminate high-cost messaging amongst other expenses. 

Conclusion

NFTically is one such platform that can help you in trading your Non Fungible Tokens. In NFTically, you can open your store in just a few minutes. Minting, selling as well buying are the options that NFTically provides their users. All you require is to set up a wallet, build your collections, put in your NFTs (which can be an image, song, video clips, etc.), and at last, list those NFTs up for sale.