Tokenization has substantial benefits that will bring structure, liquidity, and security to various markets. It has helped make those improvements in areas like art, private equity, and real estate that have traditionally been fragmented and siloed. People around the world now invest in binding peer-to-peer transactions without the need for an intermediary to limit counterparty risk. However, the team at Ahrvo believes platforms that tokenized public equities will have regulatory, tax, and practical barriers to adoption that will make it hard to scale.
Approximately 70-80% of public equities are owned by institutional investors who invest on behalf of pensions, foundations, endowments, and other institutions. Institutional investors abide by the investment policy statement (IPS). IPS statements set parameters that govern where and how a clients portfolio funds can be invested. Most standard IPS statements have 0% allocated to cryptocurrency. If and when cryptocurrency becomes a part of standard portfolio allocation, tokenized assets will likely be grouped with alternative assets. Alternative assets typically comprise 0-10% of a clients portfolio depending on their objectives (risk tolerance, cash needs, investing time horizon, etc.).
Individual stocks are the most common investment in non-retirement accounts. According to FINRA, nearly 75% of investors own individual stocks. Assets like ETFs (22%), REITs (15%), options (15%), commodities (12%) and futures (12%) still have low adoption relative to the $65 trillion equity markets. The cryptocurrency market is still in its infancy, with a total market cap that fluctuates between $225 and $275 billion. That’s about the size of Cisco Systems (#64 on the Fortune 500). In addition, it is unlikely investors are will willing to realize losses and pay withdrawal penalties on retirement accounts (their future) and proceeds from the sale to a new asset class. Especially if employers does not match contributions.
AhrvoDEEX will function as a blockchain based alternative trading system (ATS). ATS’s are non-exchange trading venues that match buyers and sellers to find counterparties for transactions. ATS’s are typically regulated as broker-dealers and not exchanges, but serve as an alternative to traditional stock exchanges. By trading traditional equities, AhrvoDEEX can integrate into the Automated Customer Account Transfer (ACATS) system, enabling the ability to onboard assets more than 20 million existing brokerage accounts. Other initiatives to scale and increase liquidity, include custodial services, APIs, SDKs, and other white-label solutions for businesses.
To drive adoption, a blockchain (cryptocurrency) project must seamlessly integrate into a sizable market and provide marginal benefits to the status quo that make users experience cheaper, faster, transparent, and more secure. AhrvoDEEX architecture was constructed to scale and capitalize on the more than 15 million brokerage transactions that occur daily (Bitcoin does 360,000 transactions a day or 2.5%). Ahrvo’s patent protected technology allows for onchain order matching and real-time settlement. The ecosystem runs on a dual account protocol traditional brokerage accounts have a digital wallet they mirror in real-time and use to transact on the AhrvoDEEX blockchain.