Security Tokens are the answer, World Economic Forum says

The security token is the answer, says the World Economic Forum (at Davos). The potential is for the creation of a multi-trillion market for STOs as investors pile funds into rebuilding cities.

The world’s cities are in desperate need of investment. For the Forum, as this recent article shows, “Distributed Ledger Technologies (like security tokens) will play an increasing role in unlocking such capital.”

The multi-trillion dollar investment is needed to rebuild slums, which is where increasing numbers of migrants to major urban areas are forced to live. Between now and 2050, number of people living in urban slums expected to triple, reaching three billion.

“Digital securities – meaning security tokens — provide a means for investors willing to enter early-stage greenfield projects, potentially capturing higher returns while tolerating higher risk,” the WEF writes.

The problem is that rebuilding a slum from the ground up is a long project that doesn’t generate much revenue at the beginning, the WEF says. 

“Digital securities provide a means for investors willing to enter early-stage greenfield projects, potentially capturing higher returns while tolerating higher risk. Unlike traditional private securities, such risk can be partially mitigated because digital securities investors can access secondary liquidity via regulated alternative trading systems. For example, a family office or hedge fund can get involved early in a project during the primary offering when the equity risk premium is highest. Access to secondary liquidity important because it then allows such an investor to exit by trading to an institutional investor in search of long-dated assets and stable cash flows.”

Smart contracts offer the means to program compliance into the STO. This means that, unless an investor qualifies, he/she can’t buy it. So the security tokens can be marketed across borders without fear that they will be offered to the wrong kind of investor

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