Security Tokenization
Topic we are concerned with:
This sector is related to tokenizing securities. The scope of analysis includes tokenizing assets on the blockchain and trading/transferring tokenized assets on the blockchain. This does not include trading whole assets on the blockchain, but rather trading fractional values of these assets. The assets to be tokenized can be financial assets (e.g., equities), or physical assets (e.g., gold). Tokenization-related patent documents tend to focus on SEC compliance, while trading-related patent documents tend to focus on authorizing participation requests and making sure the transfers are secure.
Tags and their meaning:
Platform (Financial and Physical Assets): These documents focus on the tokenization for both financial and physical assets that focus on implementations incorporating blockchain technologies. These may include a combination of blockchain technologies and any of the available subcategories. For example, a document tagged "Blockchain" in the financial space may include not only blockchain technologies for tokenization, but also debt securities, deriviatives, and equity securities compatability. However, the primary focus of documents labeled as such is on incorporating blockchain technologies into the tokenization process.
Debt Securities (Financial Assets): These documents focus on the tokenization of bonds, banknotes, and other similar securities. Debt security refers to money borrowed that must be repaid, that has a fixed amount, a maturity date, and a specific rate of interests.
Derivatives (Financial Assets): These documents focus on the tokenization of derivatives, securities that derive their value from an underlying asset or benchmark. Common derivatives include futures contracts, forwards, options, and swaps.
Equity Securities (Financial Assets): These documents focus on the tokenization of equity securities, with two primary types, (1) common shares and (2) preference shares. Common shares represent an ownership interest in a company, including voting rights. Preference shares are preferred over common shares while claiming a company's earnings in the form of dividends and net assets upon liquidation.
Energy (Physical Assets): These documents focus on the tokenization of energy-specific physical assets. Typical applications enable users to invest money in clean energy projects or blockchain-powered platforms for funding renewable energy projects through the sale and trading of corresponding tokenized energy produced by these applications.
Metals (Physical Assets): These documents focus on the tokenization of metal/mineral-based physical assets, including gold and other minerals, along with key due diligence data submitted by participating supply chain actors. This results in the creation of a digital asset that is highly tamper-resistant.
Real Estate (Physical Assets): These documents focus on the tokenization of digital assets that represent a single property or portfolio of properties.
Big Picture:
Security tokens are becoming more prevalent in the blockchain-based token offerings since 2018. In contrast to a speculative assumption of a utility token’s future value, security tokens are backed by real-world values and comply with SEC securities laws. The variety of potential asset classes that can be tokenized is expansive. Asset tokenization and exchange on a transparent and immutable ledger automates compliance requirements, enables fractional ownership, provides 24/7 global markets, speeds up settlement, increases asset liquidity, enhances governance, and reduces cost.
The majority of relevant documents in both the Financial Assets category and the Physical Assets category fall within the "Platform" sub-category. The applications of this technology in the Securities Tokenization sector increased exponentially in 2019, far outpacing related patents and patent applications in 2018. This trend is continuing, with patents and patent applications on track to outnumber those published in 2019. In addition, documents in the "Financial Assets" sub-categories continue to outnumber those present within the "Physical Assets" sub-categories.