Digital Assets

The future of financial markets

We at DALAW firmly believe that digital assets are the future of financial markets. The full digitization of financial assets will change the way investment products are issued, sold, stored, transferred, and managed. The tokenization of non-financial assets will offer investors access to completely new asset classes and investment opportunities.

What are digital assets?

Digital assets are rights and obligations represented by digital tokens issued on a blockchain. Tokens can represent financial assets like debt, equity, derivative instruments, structured products or fund units. Non-bankable assets like real estate, commodities, art, intellectual property rights or user rights can also be tokenized. Any of these rights can be structured to represent either full ownership or a fraction or part of a bundle of rights.

How are digital assets used?

Digital assets are frequently designed as investment products, using new and innovative distribution channels or offering add-on services to increase transparency or resolve inefficiencies. In other projects they are used to improve efficiency in accounting and administration processes. The most compelling projects are those which are combining a promising investment opportunity with disruptive innovation. Examples of such project can be found in our project portfolio.

How are digital assets created?

Digital assets are issued, stored and exchanged on a fully digital platforms which form a new form of capital market value chain. This has the potential to greatly improving efficiency and security. However, where digital assets serve as investment product, compliance with financial market regulation, including AML laws and regulations, must be ensured. This is a particularly challenging task, in the crossborder context.

While both cryptocurrencies and digital assets are issued and transferred on a blockchain protocol, cryptocurrencies serve a medium of exchange or as a store of value, whereas digital assets represents a claim against an issuer or a property interest in some real or financial asset.

Today digital assets are knocking on the door of institutional investors and are ready to unfold their potential on a much bigger scale. Projects with a compelling commercial underpinning, ensuring full regulatory compliance, are key to ensure the necessary credibility and appeal to large scale investors. establish a..

Digital assets serving as an investment product are subject to financial market regulations of the state in which they are issued. The marketing and distribution of such products is governed by country-specific rules of the states in which investors are domiciled. Even within the European Economic Area, these rules are not fully domiciled, and outside of Europe they are very much different from state to state. While a carefully planned structure can make use of efficiencies in cross-border distributions, disregarding financial market regulations can result in enforcement actions by regulators.

A digital asset project is a challenging, multi-disciplinary project which usually requires substantial work and financial resources. Before considering tokenization, we recommend to carefully consider why a tokenization is the better choice than a raditional finance.

Issuers of digital assets are still mostly self-issuers. A solid community of investors and users is therefore essential for a viable project. This requires substantial resources, time and effort to spread the message and to build credibility with a valuable community. The community itself is the back-bone of corporate value.

The world of digital assets is still at an eargly stage with small market capitalization and institutional acceptance gradually being built. Their liquidity is currently limited, since regulated trading venues are just being created. It is therefore important to be realistic and to carefully manage expectations.

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