Traditionally, despite what the end-users are seeing as the trading platform that matches trades electronically, the securities themselves are not fundamentally “smart”. In effect, they are still physical, paper-based certificate of ownership that will experience multiple layers of processing, from settlements, clearings to custody. This latency for settlement is denoted as what we have seen as “T+2”.
The innovative difference for Digital Securities is that we program traditional securities (i.e. Stock, Bond and ETFs) to be the “smart”, by which implementing different execution logics and storing various confidential information. Thus, issuers or investors enjoy faster and better execution throughout the security servicing lifecycle.
What’s new? Digital securities are simply smart evolution from traditional paper-based certificates because they can no do three things.
- Store critical information such as details of security, ownership, and other sensitive information as encrypted code
- Authenticates a person’s identity electronically, using the encrypted codes as the proof
- Self-executing smart contracts, meaning that digital securities can also store the logic of how transactions will be executed, including dividend issuances