Challenges Facing Digital Securities
Digital securities are a very recent phenomenon. The idea of digital securities only became popular in 2017. This was a major contributing factor in the cryptocurrency boom that took place during the same period of time. There are many financial analysts who believe that digital securities have a very bright future. However, there are others who also believe that there are some small challenges that need to be surmounted before digital securities become the norm.
In this article, we will first understand what digital securities are and how they are different from digital assets. We will then have a look at the major challenges facing the digital securities industry.
Digital Securities vs. Digital Assets
Digital assets represent something which has value. The records of the ownership of such assets are kept using distributed ledgers online. It needs to be understood that in this case, the asset itself is digital. Common examples include cryptocurrencies. Digital assets only exist in the digital world. For instance, cryptocurrencies have very little value in the offline world.
Digital securities, on the other hand, are a representation of an asset which may or may not be digital. The record of ownership is still kept on a distributed ledger online. However, the asset need not be digital. For instance, shares and bonds of an industrial age brick and mortar company can also be held as digital securities.
Since digital securities can be used by a wider range of industries, they have more commercial application. As a result, they are becoming more popular as compared to digital securities. However, there are many challenges that these securities face. Some of them have been listed below.
Challenges Facing Digital Securities
The bottom line is that digital securities are still a relatively nascent concept. It is likely that they become popular and overtake the dematerialized securities that we now hold. However, it seems like a long way away since there are still a lot of challenges that digital securities need to overcome.
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