On August 17th, Union Bank AG announced that they would be issuing their own security tokens, in addition to a fiat-backed Union Bank payment stable coin.
The bank is working with Liechtenstein’s regulatory authority FMA to launch this blockchain initiative. Liechtenstein has already established itself as one of the most crypto-friendly places in Europe. Under Prime minister Adrian Hasler, the country has been forming a new set of ‘blockchain laws’ that would help them ultimately establish a regulatory base for blockchain businesses. Union Bank AG already supports ICOs and clients through their partnership with crypto-brokers and advisors, making them the ideal institution to venture further into crypto services.
Security tokens are a recent innovation in the crypto space, one that combines the value of cryptocurrencies as an investment vehicle, with the regulatory structure needed for institutions to adopt the technology with ease. They are essentially an investment contract that represents legal ownership (as recognized by the SEC) of a physical or digital asset (like real estate, artwork or ETFs) that has been verified on the blockchain. Investors can exchange fiat money or cryptocurrencies for security tokens via a smart contract. With this verifiable and legal ownership, security token holders can easily trade their tokens for other assets, use them as collateral for a loan, or even fractionalize them to store in different digital wallets.
Unlike utility tokens, which are primarily used to pay for goods and services within a blockchain ecosystem, Security tokens more closely resemble traditional stocks that pay dividends and require companies to register with the SEC before issuing them. This distinction makes Security tokens the ideal cryptocurrency to be issued by Banks, Hedge funds, or any major institution that wishes to get involved in the crypto space while maintaining regulatory compliance.
Union Bank AG aims to become a full-service blockchain investment bank, eventually adopting the blockchain fully throughout its processes and supporting technology. Although the initial goal of Bitcoin and Blockchain was to replace the banks, it seems like the future of the technologies will be one where Banks are able to utilize blockchain in order to transform how they operate, becoming more efficient and secure as a result. This merging of industries may ultimately prove to be more beneficial to banked and unbanked people all over the world seeking access to better financial services.