I got to speak at SFBW today about security tokens. I realized about halfway through the panel that my interpretation of what a security token might offer is very different from the common definition. 1/
A lot of people say security tokens will solve trade execution issues by adding liquidity to small or fragmented markets. 2/
But really those markets are illiquid because they don’t have scale - not because they run on bad technology. 3/
A lot of people say security tokens will help clearing issues by making trading globally accessible, 24/7, or by reducing time to T-0 as opposed to T+2. 4/
But really all of those constructs exist purely because of human factors like regulation or convention - not technology. 5/
When I talk about security tokens, I’m talking not about trying to solve issues that exist at the execution and clearing steps of a trade. 6/
Security tokens, like all tokens, are revolutionary insofar as they can change way we settle transactions. 7/
As a junior kid on a Wall Street trading desk I had the pleasure of staying late to make sure all of our trades from the day went through correctly. 8/
Trade breaks, discrepancies with counterparties, issues with the DTCC and other CSDs were all common settlement issues. 9/
These problems are niche and boring and unsexy and clouded in lots of jargon and acronyms. They don’t often get talked about by thought leaders on the topic of security tokens. And I’ve never seen them discussed by developers at a hackathon. 10/
But there was a time - a long, long time ago in a land called enterprise blockchain - where a lot of good thinking did go on about the technology issues of securities settlement. 11/
On another panel at Consensus 2017 I along with many who are better versed on the topic of securities settlement discussed a different vision for securities tokens. Regardless of how you feel about security tokens I urge you to check out the conversation:
