How to Build a Security Token Exchange Platform

Security tokens are an ingenious offering to the cryptocurrency world, given that these tokens serve as a bridge between legally financial assets and Blockchain networks. As tokenized assets, and being backed by the Securities and Exchange Commission (SEC) rules and regulations, security tokens are gaining momentum among financial institutions, service providers and investors.

If you are planning for security token exchange development, you are more likely to generate more revenue, the reason being the worldwide acceptance and adoption of security tokens and thus the increasing demand for security token exchange platforms to buy and sell these tokens.

Let’s gain an in-depth insight into security tokens’ potential to transform the crypto industry, to solidify your decision to build your security exchange.

Security Tokens – Revolutionizing the Crypto Market with Legal Fundraising Paradigm

Security tokens are akin to traditional securities but have one difference – tokenization of real-world assets like real estate, exclusive goods, mining repository, and more. Security tokens forge a path to:

• High liquidity – startup equity, LP shares, and fine art are all illiquid assets. Security Token Offerings (STOs) have the potential to unlock liquidity. They make small, private non-liquid securities accessible to everyone.
• Transparency and round the clock access – Blockchain technology is transparent and open; it is open 24/7. It pivots around the concept of a global, national agnostic market that is always operational, thereby allowing faster and cheaper trades.
• Programmability – unlike many legacy stocks, security tokens are programmable. You can command security tokens to do anything – automate corporate governance, proxy voting and dividends.

Besides these benefits, security tokens are poised to disrupt the crypto market in the following five ways:

Ownership and compliance

The programmable nature of security tokens allows compliance protocols to be embedded into the actual asset, and the protocols can be amended over time. This means that there is no limit to the rules and systems that can drive an STO.

Alleviated frauds and money-laundering

As the number of middlemen decreases, the chances of corruption and manipulation, during the investment process, would mitigate considerably.

Better cryptocurrency ecosystem

Increased credibility and regulations associated with security tokens will certainly build traditional investors’ trust in cryptocurrency, who are currently skeptical about digital currencies. This would bring in new market players and capital. Investors relying on institutional adoption would start considering security tokens, and not just Bitcoins.

Ownership of tokenized assets

Utility tokens were created with intend to provide investors with future access to a product or a service, however, security tokens provide actual ownership of an underlying asset. Anyone investing in a real estate token gets fractional ownership of that tangible property rather than an IOU.

Increased innovation

A regulated tokenized ecosystem paves the way to greater acceptance and innovations in the crypto world. It means more investment opportunities and huge returns. The trend has already commenced as businesses and individuals are considering building security tokens and indulging in security token exchange development.

Security Token Exchange – An Alternative Trading System Fueling Security Token Trading

A security token exchange falls under the bracket of Alternative Trading System (ATS) which matches buyers and sellers to find counterparties for transactions. An ATS is regulated as broker-dealers rather than as exchange and provides a market place or facilities to bring together the buyers and sellers of securities. Alternative Trading Systems need approval from the SEC.

A security token exchange facilitates buying and selling of security tokens. It requires a new technological infrastructure that is fully-compliant to the SEC regulations.

There are certain limitations to the infrastructure design of conventional securities. Most issuing companies, banks, and peer-to-peer platforms are permitted to operate in their regional jurisdiction and cannot allow trading of securities outside of this jurisdiction. Furthermore, most security services are only accessible to investors that fulfill a specific criterion and are open during business hours only.

Security token exchanges built from ground zero can address these problems in their architecture. Although security token exchange platforms are bound by the jurisdiction in which they operate, they can allow security trading for a much broader audience without closing times – owing to Blockchain technology. Moreover, Blockchain technology allows the ownership of security tokens to be embedded in the token itself, allowing secure and instant transferability of security tokens.

Must-have Features of a Security Token Exchange

When indulging in security token exchange development, businesses and individuals can reinforce their exchange with the following features:

• Powerful matching engine – to match buy and sell orders with minimum latency.
• Secure hot wallet – to provide exchange users with a secure infrastructure to send, receive and store their security tokens. Fortifying the wallet with multi-sig feature can enhance the security paradigm manifold.
•  Multi-layer security – to allow secure trading. You can underpin your exchange with market-leading security features like two-factor authentication, data encryption, SSL encryption, HTTP authentication, anti-Distributed Denial of Service (DDoS), Cross-Site Request Forgery (CSRF) Protection, and more.
• KYC and AML Verification –geography-based KYC helps verify user identity while following the right protocol. This allows secure access to the security token exchange by only legitimate and authenticated users.
• Multi-currency Transactions –to enable a seamless integration of multiple cryptocurrencies and fiat currencies into the exchange as per your business needs.
• Payment Gateway Integration – to allow exchange users to buy and sell security tokens using fiat currencies via a credit card, debit card, and other payment systems.
• Multi-language support – to expand the reach of your security token exchange globally.

Build your Security Token Exchange with Industry Experts

There are various aspects like security, performance, user experience, and the SEC compliance that need to be handled during security token exchange development. At Antier, our Blockchain experts take care of all these aspects and toil relentlessly to deliver a product that helps you accomplish your business goals. We create a security token exchange which is compliant with the SEC regulations set for an Alternative Trading System.

Our coherent roadmap and technology-agnostic approach navigates your security exchange development journey. We reinforce the exchange with industry-leading features to achieve world-class performance and user experience. Our mission-driven services accelerate the deployment process, suit all budget needs and help you stay ahead of the game.