Security Token

Definition

Security token are digital representations of an asset such as equity, fixed income, real estate,investment fund shares, commodities and structured products that are traded and held on a blockchain (a distributed ledger). What makes these assets ‘securities’ is that they’re regulated, with governing bodies across the world dictating how they can be issued, managed, and exchanged.

Creation and Type

Creating a security token involves deploying a smart contract on the blockchain that can programmably enforce regulatory compliance, and minting and distributing the token to investors. Security tokens are assigned symbols so as to represent a particular asset whereas their uniqueness is defined by the address they are given on the blockchain.

Assets represented by a security token can be on-chain and off-chain. When a traditional asset is represented on-chain by means of a security token, we call it tokenised security. On the other hand, when this asset is defined and exists only on the blockchain, they are referred to as natively digital securities.

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