Blockchain is revolutionizing the way contracts and agreements are created, and the way securities and assets trade hands between buyers and sellers. Digital securities or tokens rely on blockchain to verify their value and authenticity free from the need for paper-based contracts and share certificates.
NFTs are just that: tokens. If minted as a digital asset and offered for whole ownership, there’s no need to worry about securitization of the NFT. People are free to buy, sell and trade those tokens as they please.
But as soon as people look to create and market a NFT for real assets with investment contract elements and/or offer fractional ownership in a NFT, they have created a security. For example, if someone creates a NFT for a piece of art valued at $50 million and sells 50, $1 million shares, then one has created a security — and this requires the issuer to comply with the applicable securities laws and regulations.
New FinTech platform are expanding the types of issuers beyond those offered by traditional capital markets. They are pushing the boundaries into direct ESG investing and other securities to offer investors a range of choice and opportunities. Some innovative variations of NFTs deemed as securities fit that bill.
A good Canadian example is a platform like Finhaven Private Markets. They are a registered exempt market dealer and marketplace with a platform that allows for buying and selling security tokens. They adhere to all regulations and compliance standards set by securities regulators from BC to Quebec in Canada. They are able to work with people looking to sell tokens, providing a simple turnkey solution in a digital marketplace.
The digital asset revolution is here and Canadian innovators are at the heart of it.