Financial contracts, and in particular securities which are in essence tradeable financial contracts, have been used for financing and risk management for centuries. The first stock exchange in the world, the Amsterdam Stock Exchange, has been established in 1602, but already the ancient Greek used contracts for managing the risk of assets and assuring their financing.
Blockchain technology is now at the cusp of being a viable alternative to the more traditional world of centralised exchanges, custodians and depositaries. Thereby we refer to Blockchains in the widest possible sense, including not only the permissionless chains like Bitcoin and Ethereum, but also for example proof-of-authority chains run under an cooperative charter by an association, and other smart-contract based designs.
There are many reasons why an issuer might prefer blockchain technology over the more traditional approach. For example, issuing on the blockchain might lead to a lower cost in terms of issuing and servicing obligations, making this a viable route for issuer that would otherwise not find it economically compelling. Also, blockchain-issued securities allow for a richer interaction between issuers and investors, enabling a closer relation between investors and issuers which in tern enables new governance models. Last but not least the rich API of a blockchain-based system allows the development of new financial services on top of the tokenised contracts, for example asset management services on asset classes not previously covered.
Blockchain issuance is still in its infancy, and it can be a technological and regulatory minefield. On the technology side, there are currently dozens of competing technologies, all coming with their own distinct advantages and drawbacks. On the regulatory side, in many jurisdictions the law still has to catch up with the opportunities and challenges that blockchain-registered securities present, and even in the jurisdiction that have updated their laws, a number of complex rules and procedures has to be followed.
At Lexbyte we have assembled an core team of experienced lawyers, bankers and consultants that have a proven track record both in the traditional financial services industry and in the world of blockchain finance. We can also draw on a wide and distinguished network of associates (developers, designers, communication experts, local lawyers) that enable us to support our clients in every aspect in their effort to issue tokenised assets or claims.