Tesla’s $1.5 billion investment into Bitcoin is just the beginning.

Elon Musk’s recent investment in Bitcoin through Tesla is a vote of confidence in the genesis cryptocurrency. It also reflects a growing acceptance of the broader value inherent within blockchain technology. Tesla is likely to be the first of a number of large companies who not only invest in cryptocurrencies but see value in implementing blockchain into their business models. This trend will add significant impetus to the industry, accelerating its growth and wider adoption.

“Buy and hold stock in companies where you love the product roadmap, sell where you don’t.” ― Elon Musk

After Tesla announced its $1.5 billion investment in Bitcoin, they released a statement identifying the investment as a way to diversify their balance sheet with “certain specified alternative reserve assets”. This approach makes sense for Tesla, as they have significant cash reserves, the value of which which is being eroded by the infinite quantitative easing policies of the Federal Reserve.

The diversification of their reserve assets makes Tesla a beneficiary of Bitcoin’s rising value and positions them to become a champion for the cryptocurrency with US regulators. The announcement of their investment not only helped boost Bitcoin’s price but also had a positive impact on Tesla’s share price. In the future, the electric vehicle manufacturer intends to accept payment for their products in Bitcoin.

Confidence is key to the strength of the market, and a large player like Tesla entering the market in this manner delivered a major boost to investor confidence. At the time of writing Bitcoin’s price is soon expected to break $50,000. These developments set the stage for the wider adoption of blockchain technology.

Tesla is perhaps the first in a wave of major companies to invest in Bitcoin. Wall Street’s RBC Capital Markets recently shared a note with investors identifying that Apple would do well to follow Tesla’s example and enter the cryptocurrency market. Apple is arguably better positioned than Tesla to segway into cryptocurrency. With almost $200 billion in cash reserves, Apple could easily match and exceed Tesla’s initial Bitcoin investment.

However, Apple represents a different set of synergies for cryptocurrencies. Their existing customer base, payment systems and digital wallets could be leveraged as an ideal pivot into cryptocurrency. There is precedent for such a move. Last year PayPal announced that it would allow customers to buy, sell and hold cryptocurrencies. If Apple were to follow suit, it would position them as a market leader with a dominant position. It would also provide increasing legitimacy to Bitcoin that would have a knock-on effect for other cryptocurrencies. Such a development might perhaps signal the beginning of the end for inflationary fiat currencies.

There are analysts who believe that Bitcoin could rise in price to $400,000 and at Sonata Capital we are bullish on the value of cryptocurrencies. However, there are competitive advantages inherent within other cryptocurrencies which make them increasingly relevant. Ethereum offers a level of utility that Bitcoin does not have. As a store of value, Bitcoin has proven itself, but Ethereum’s utility makes it an impressive value proposition.

Tesla is only the first multinational to invest heavily in cryptocurrencies and we are likely to see a growing trend for such investments. Cryptocurrencies offer an opportunity to make money through their rising values, but they also provide a hedge against the inflationary impacts of central bank policies. Multinationals with large cash reserves understand this and Tesla is leading the migration.

It is valuable to note that the value of blockchain technology is far more nuanced than just cryptocurrencies. Blockchain technology brings a number of key advantages to businesses that improve operations and reduce costs.

Security tokens are digitized securities that can represent equity in a company. They are built around smart contracts which can be programmed to provide functions which streamline business processes and deliver cost savings. The digitization of equity brings liquidity through the issuance of security tokens, peer-to-peer trading and secondary markets. Their fractional nature ensures that smaller investors can participate in the market, bringing wealth creation opportunities to those who have previously been excluded.

With such a plethora of opportunities created through blockchain technology, the adoption of Bitcoin as an asset is only the first step. As the technology matures there will be wider integration of blockchain technology throughout global business structures. There may come a time when all multinational businesses function with the assistance of the blockchain.

Sonata Capital is registered in the Labuan International Business & Financial Centre, and invests in companies successfully exploiting the vast opportunities of the digital economy.

100% of the equity in our funds have been tokenised, and will be listed on digital securities exchanges in Labuan and elsewhere. The equity of Sonata Capital Ltd (LL16076) has also been tokenised, and the rights to the equity is represented by the SONATA security token issued on the Ethereum network.

Visit our website, join our Telegram chat, or contact [email protected] for more information about our company and funds.

Institutional Money Is Moving Onto The Blockchain was originally published in Sonata Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Some types of assets are perfect for the tokenization process.

Asset tokenization is set to take capital markets by storm. The process offers a number of key advantages which are set to revolutionize how we invest in and trade assets. Many asset classes can be tokenized but there are some assets which are ripe for tokenization because digitization brings advantages which are not otherwise possible. In this article, we take a look into the juiciest asset classes for tokenization and why they offer such significant advantages to investors.

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble” ― Warren Buffett

The World Economic Forum estimates that the market for tokenized securities could be worth as much as $24 trillion within the next 6 years. This represents a significant portion of the global securities market. This growth is spurred by the advantages that digital securities offer over traditional securities. Some of the key advantages are:

• Global liquidity. Digital securities can be globally traded with anyone, anywhere, at any time. This brings significant liquidity to the marketplace.
• Fractionalization. Security tokens can be fractionalized into fragments allowing for greater participation by smaller investors.
• Safety. Security tokens are stored in digital wallets and because they are tied to an investor’s identity they can be returned to their rightful owners in the case of loss or theft. This stands in stark contrast to the issues surrounding custody of cryptocurrencies.
• Cost and speed. Security Token Offerings (STOs) are faster and cheaper to bring to market than traditional Initial Public Offerings (IPO).

There are several categories of asset that particularly lend themselves to being tokenized. These are usually asset classes that have high value but low liquidity. Tokenization helps to bring liquidity to these assets by allowing investors to invest in asset classes that have traditionally been out of reach for smaller investors.

• Wine. Switzerland’s new blockchain law will open up a number of asset class for tokenization and fine wines are the first. Fine wines appreciate in value over time but require careful storage and handling making them unsuitable for many smaller investors. Tokenization will open this interesting asset class to a wider investor base, while effective management will ensure the wines are kept in premium condition.
• Real estate. The world is beginning to realize the numerous benefits of tokenizing real estate. Beyond opening this valuable asset class to more investors and greater liquidity, there are significant advantages which tokenization offers. There are numerous touchpoints in the lifespan of a real estate contract and these can be streamlined through digitization. Rights such as voting and dividend payments can be programmed into the smart contracts which underpin security tokens.
• Luxury goods. High-value luxury goods such as premium sports cars are out of reach for most investors but are an asset class that offers significant returns. Tokenization will allow small investors to invest in these assets and benefit from the value inherent in their limited availability.
• Fine art. The art world can deliver a significant return on investment. In some parts of the world fine art is one of the top-performing asset classes and tokenization will bring ownership opportunities to the masses. Existing collections can be tokenized to deliver liquidity and return on investment to their owners while stipulating that the collections remain intact.
• Precious metals. There is an exciting market being created for tokenized precious metals. Investors have the opportunity to invest in precious metals without the issues associated with custody and management. Companies such as MetalStream are offering tokens which represent 1 gram of LBMA certified gold bullion. Gold can be redeemed in lots of 1KG while tokens can be continuously and globally traded. Gold is only the first of several precious metals that can be tokenized.

Tokenization is bringing advantages to all participants in the global securities market. The process of digitization will bring investment opportunities to the wider public that has previously been excluded from investing in certain asset classes.

We are expecting that our home region of Asia will represent the swiftest and widest adoption of digital securities. A cultural bias towards longterm investing, combined with a high rate of smartphone penetration, and the fact that 90% of the 2.4 billion new members of the emerging middle class will come from the region, make Asia an ideal market to adopt digital securities.

At Sonata Capital our goal is to make this adoption a reality in Asia and support the most vibrant companies in their tokenization endeavours. This will be an exciting market to participate in and for once these financial opportunities will not be limited to the wealthy.

The future is bright, the future is tokenized!

Sonata Capital is registered in the Labuan International Business & Financial Centre, and invests in companies successfully exploiting the vast opportunities of the digital economy.

100% of the equity in our funds have been tokenised, and will be listed on digital securities exchanges in Labuan and elsewhere. The equity of Sonata Capital Ltd (LL16076) has also been tokenised, and the rights to the equity is represented by the SONATA security token issued on the Ethereum network.

Visit our website, join our Telegram chat, or contact [email protected] for more information about our company and funds.

The Ripest Asset Classes For Tokenization was originally published in Sonata Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

Security tokens offer key advantages over traditional financial structures for real estate developments.

Tokenization of real estate assets represents one of the most profitable use cases for security tokens. The process of tokenization involves representing ownership of an asset, such as real estate, through digital security tokens on a blockchain. It is valuable to note that tokenization does not adversely impact traditional ownership structures or sales initiatives, it enhances them. Security tokens have several key value propositions for real estate developments:

1. They can be swiftly issued to raise liquidity from an international market.
2. They can be continuously and globally traded.
3. They are secure, in the event of loss or theft, they are returned to their owners.
4. They can be fractionalized to access a broader investor base.
5. They are covered by similar laws to those protecting owners of traditional securities.

Tokenization of existing real estate developments involves migrating ownership into digital security tokens. Once a company or asset is tokenized, it can be sold to the market through a Security Token Offering (STO). The STO can involve private placements with High-net-worth individuals, institutions and family offices, and/or a public offering. In the future, it is expected that STOs will outshine IPOs, due to the advantages they deliver to both issuers and investors. The World Economic Forum estimates that the global market capitalization for digital securities could be worth $24 trillion by 2027.

Liquidity and cost savings are key advantages that security tokens offer over traditional real estate financing structures.

Liquidity

Several factors contribute to delivering real estate liquidity through digital securities.

1. A global investment pool. Tokenization allows access to a truly global pool of investors. Only capital and an internet connection are required for compliant investors to participate in buying, holding and selling global real estate. Compliance processes take only minutes to complete online. Tokenized real estate provides access to investors in other digital asset classes such as cryptocurrencies. Security tokens can be traded around the clock with anyone, anywhere.
2. Reduced cost of entry. Security tokens can be programmed for fractionalization. This subdivision lowers the minimum investment cost, opening up investment to a significantly greater number of smaller investors who would otherwise be unable to participate in real estate ownership.
3. Reduced sale time. Compared to traditional methods of real estate sales, well marketed, effectively structured STOs can be placed swiftly. This is particularly pertinent during a period of global lockdown when traditional investors are unable to travel to the real estate location.

Cost Savings

Cost savings associated with the tokenization of real estate assets not only improve profit margins but also streamline operations.

1. Reduced cost of public offering. Compared to an IPO, an STO is faster, cheaper and global.
2. Standardized transactions. Security tokens are built around smart contracts programmed on a blockchain. These smart contracts are standardized and can be coded to represent sale and purchase agreements. Contracts are therefore not required to be individually negotiated as the terms are automatically enforced. This substantially reduces transaction costs.
3. Immutability. As transactions are completed, they are registered and confirmed on the blockchain. This immutability gives investors confidence that their transactions cannot be falsely altered at a later stage and ensures there is no illegal double selling of land.
4. Streamlined management. There are numerous transactional touchpoints throughout the life of real estate contracts. Tokenization offers significant cost savings for managing investors and their ownership rights. Transactions are transparent, and the programmable nature of smart contracts ensures automation of dividend distribution and other ownership rights, such as voting.

There are several kinds of security tokens which could be applied to real estate investments. Each of these tokens offers a different value proposition.

1. Tokenization of a real estate asset. The ownership rights of a property can be tokenized to access liquidity from a global investor base. The value of the token is backed by the value of the land.
2. Tokenization of equity in an entity. The ownership of the legal entity that owns real estate can be tokenized. These equity tokens can provide rights to any of the other tokens issued by that legal entity.
3. Tokenization of profits. The rights to profits, such as rental income from real estate, can be tokenized.
4. Debt interest. Ownership in a debt instrument secured by real estate can be tokenized.
5. Carbon credits. The carbon credits generated by real estate can be tokenized.

As the advantages of tokenized real estate become increasingly implemented we will see a growth in security token adoption. This process will bring advantages for all stakeholders in real estate transactions: landowners, developers and investors. Wider adoption should spur new and innovative approaches between the various forms of security tokens for real estate. The combination of land and blockchain will create a vibrant, interesting marketplace.

Sonata Capital is registered in the Labuan International Business & Financial Centre, and invests in companies successfully exploiting the vast opportunities of the digital economy.

100% of the equity in our funds have been tokenised, and will be listed on digital securities exchanges in Labuan and elsewhere. The equity of Sonata Capital Ltd (LL16076) has also been tokenised, and the rights to the equity is represented by the SONATA security token issued on the Ethereum network.

Visit our website, join our Telegram chat, or contact [email protected] for more information about our company and funds.

Opportunities For Tokenization In Real Estate was originally published in Sonata Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.