“The future is digital, keep your passwords provisional, as security is an asset the liability is technology.”
INTRODUCTION
Digital assets are the assets that are issued and transferred with the help of blockchain technology or distributed ledger. Some examples of digital assets are cryptocurrency, securities, property, commodities.
Remember what we had to do before two and a half decades to buy a stock? Shouting the buy and sell to handling all the physical stocks as proof of ownership and now we have them in our pockets sitting in a little device called smartphones. Well, you would have had an idea what digital securities are, they are a form of tokenization of stocks. Converting an asset into digital security on a blockchain is known as tokenization. It is done to reduce the cost of the transaction, provide convenience to the customers and reduce the time required to complete the transactions.
Different types of digital securities-
Equity - The assets which give ownership to the investors are called equity. Some different types of equity are common shares, preference shares, convertible bonds, and warrants.
Debt - In this, the investor gives money to the companies which shall be repaid, and also the interest must be paid. Debt securities are debentures, certificates of deposit, corporate bonds, treasury bills, government securities.
Derivatives - They are used to minimize the risk of a particular asset. It depends on variables like prices of stocks, commodities, currencies, goods, and market indices. The main types of derivative securities are futures, forwards, options and, swaps.
HOW ARE THEY BENEFICIAL?
Cost-effective and less time-consuming- The cost of opening a dematerialized account is zero, only minimal maintenance charges apply to the investors. The cost of transactions is less and the process is much faster than traditional ones, as the transactions are now completed within seconds.
High liquidity- The investors have access to their services of buying and selling securities whenever they want. And the complexity of transactions is reduced by the automation process by different software.
Huge variety of assets- In the traditional system there were some illiquid assets like real estate, private equity and private debt which were accessible to large financial institutions are now accessible to small investors.
International reach- The investors can even trade all the stock exchanges across the globe. Though there are certain conditions to invest in international markets.
A PLUNGE IN THE TREND DUE TO PANDEMIC
During the pandemic we saw a huge increase in the number of investors because of many reasons: -
Decrease in interest rates on fixed deposits and many other schemes, decrease in repo rates all these have led to decline in the saving options for investors and hence convinced small investors to enter into capital markets.
Work from home tradition has given people a lot of free time and thus this can be one of the factors of the slurp in retail investors.
The market capitalization has increased significantly across the globe, but Indian markets have increased the most as BSE’s market cap has increased by 1.8 times. Also, after the year 2021 has seen an increase in the global liquidity in the markets.
Loss of employment, decrease in salary, the downfall of the economy has made the life of people even worse during the pandemic, whereas the stock markets were growing in a very good phase. This has attracted people who had savings that can be used wisely.
CONCLUSION
The world is going digital, and digital is the future of the globe. Therefore, all the economies must follow this path to match the steps will the world. Indian stock exchanges are still focusing on improving their digital platforms and adding new rules and regulations to make digital markets a safe and trusted place to invest as this is the future of investment.
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Well explained!
Good One💯