ST0x: Equities are the most attractive tokenised asset class
Single corporate stock public equities outrank real estate, ETFs, private equity, fixed income and commodities as the most attractive tokenised market, new global research from ST0x reveals.
Among the benefits of investing in tokenised equities, more than a third (36%) of professional investors say instant settlement is most valuable, while 31% point to continuous 24/7 trading. One-fifth highlight the enforceable right to receive the underlying share; 12% say the materially lower transaction costs; and 3% say fractionalisation to any size.
While the study with 200 institutional investors and wealth managers finds growing appetite for tokenised assets, 39% of respondents identify counterparty and custody risk as a barrier to entry to the market.
A similar number (38%) say regulatory uncertainty – specifically a lack of clear, standardised rules from major financial authorities like the SEC or ESMA – as preventing them from investing, the study across North America, the UK, continental Europe, the Middle East and Asia Pacific found.
Around one in seven (14%) point to a lack of legal recourse and fear of inadequate legal protection or investor rights if a platform fails or gets hacked as an obstacle to investing in tokenised assets, while 9% say know your customer (KYC) or anti-money laundering complexity is a hurdle.
Looking at operational hurdles to tokenised asset investing, 46% of survey participants point to fragmented liquidity noting it is difficult to find buyers or sellers because trading volume is split across too many different blockchains.
More than a quarter (26%) identify smart contract vulnerabilities highlighting a fear of software bugs, code exploits, or hacks draining the liquidity pool. Around 15% say overwhelming interface designs or confusing wallet management are a challenge, while 14% say high network fees are a barrier to investment in tokenised assets.
When asked about investing in tokenised equities, from a portfolio management perspective 45% point to weak secondary markets as a major obstacle to investment; 42% of respondents say accuracy of valuation data is a significant challenge, while 34% say they miss the requisite institutional tools to invest.