Issuance of cryptoassets: moving towards strategic corporate innovation

One of the future goals of entities will be to establish diverse teams and profiles who specialize in different areas

In addition to being the project for which blockchain technology was invented, Bitcoin is considered to be the first decentralized cryptocurrency. This digital currency was the result of an open-source development initiative without funding, backed by the commitment of anonymous members who support the transaction and records system (encouraged through the actual currencies) and the trust of its user community.

As a result, maintaining this commitment and trust depended on making bitcoins financially appealing. The moment this cryptocurrency was accepted as a transactional currency (the first exchange was for a pizza), its use and value skyrocketed, along with interest in it.

The system’s success encouraged other projects with a decentralized philosophy to follow the same model, particularly those that also made it possible to issue tokens, unique identifiers that digitally represent an asset, good or service sold by the private entity issuing them.

Unlike currencies, which are native to their own blockchain/DLT platform, tokens are associated with existing platforms that enable their creation and launch, primarily Ethereum. This has made it possible to develop a market with more than 2,000 coins and tokens in only a few years, and with a current capitalization that is equivalent to that of a large global bank.

Many projects imitate securities markets by attempting to capture funds with an initial distribution of their new coin (pre-mined) or token, a process known as crowdsale. This crowdfunding financing mechanism, which is usually done through an ICO, has resulted in legal ambiguity in certain instances and in actual fraud in others, forcing regulatory authorities to take action.

To ensure greater transparency towards consumers and investors, these cryptoassets have been classified into three main categories, according to their purpose:

Utility tokens, which provide users with future access to a company’s products or services, contribute to the system or interact with it. Although they can be classified as cryptocurrency exchanges, negotiating with them is not the main goal for consumers.

Security tokens, viewed as an investment concept from the issuing entity or the underlying assets, must comply with applicable bond-securities requirements. Their primary purpose is to obtain economic gain.

Cryptocurrencies or cryptocoins are an accepted exchange method, despite not being issued by the corresponding central authorities. However, they cannot be used for this purpose because they are highly volatile. Stablecoins are a special type of cryptocurrency aimed at ensuring stability and whose value is pegged to an external good that backs it (collateralized): fiat money, another good (commodity) or a related cryptocurrency. Alternative methods are not backed by another asset, and instead use algorithms and smart contracts to prevent price fluctuations.

Once issued, they can be listed on platforms to negotiate exchanges and acquire them to be used, held or transferred with the same commitments required by law for their traditional equivalents.

This regulatory trend is encouraging large corporations in the area of finance, legal, energy and banking, and even central banks, to create this type of asset. This is because, on the one hand, cryptocurrencies serve as a fast and efficient endogenous payment system; and on the other, tokens make it possible to launch new products and services under a more participative model that involves communities interested in backing their development, thereby lowering the entity’s financial risk and overall exposure.

What does this offer to organizations?

The largest social networking and messaging site has been the latest in having its own digital currency and leveraging its platforms to enable transactions between individual users and businesses. Networks bring business, and business brings payments.

However, industrial corporations that have been around for a long time and need to transform their business and operating models are the ones that see the greatest potential in tokenization instruments, whether to face the challenges of digitalization, of new economies or of greater social and ecological responsibility. It is an innovative medium that enables entities to:

– Focus the development of new products and services towards a digital and technical setting.

Associate themselves, under shared investment models, with user communities that are interested in the proposed products and services.

Register the impact of their products and services.

To make these types of projects a reality, organizations must have diverse teams that assume different roles (project management, product management, innovation, blockchain specialists, etc.) and profiles who specialize in different corporate areas (legal, IT, finance, etc.). As a result, one of the future goals of entities will be to equip their organizations with these types of skills and knowledge.

 

José Alberto Pérez
jose.alberto.perez@nae.es

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Nae works with telecom operators, large companies and public administrations to anticipate the challenges of market growth and transformation, improving their business strategy and operational efficiency. The company has offices in Spain, Colombia, Mexico, Brazil and Costa Rica, and has a team of over 600 professionals.