Global pioneers in asset management tokenization Smart Wealth and Chartered Investment have achieved a major milestone by introducing the world's first security token for an AI-based multi-asset investment strategy in accordance with the German Investment Code (eWpG) and BaFin regulations.

Structuring security tokens requires a blend of asset management, legal, structuring, and IT expertise to fully leverage the benefits of blockchain technology.

Smart Wealth and Chartered Investment combine this expertise with an efficient proprietary IT solution and a scalable issuance platform.

Smart Wealth AG is an independent and Finma-licensed asset manager based in Switzerland that applies and leverages artificial intelligence to revolutionise asset management.

Through dynamic adjustments in client portfolios, Smart Wealth strives for highest returns with minimal risk and has established itself as a trusted partner for numerous companies, banks, asset managers, and high-net-worth clients since 2016.

Chartered Investment is a financial technology company specializing in financial engineering. Headquartered in Düsseldorf, Germany, Chartered offers several innovative technological platform solutions that will be essential for the global financial industry in the future.

Smart Wealth said this ground-breaking step allows the group to offer its clients access to their flagship Multi Asset Global Rotation AMC (CH0590207988) through regulated security token with own ISIN on the blockchain.

Since its launch in February 2021, the Multi Asset Global Rotation AMC has proven to be one of the top-performing multi-asset products worldwide, it stated.

Now, by tokenizing traditional investment strategies, the Swiss firm has overcome a significant challenge that required intensive pioneering work in the legal, IT, and asset management fields.

The process of issuing a security token presented previously unresolved issues that have been resolved through the collaborative efforts of regulatory authorities, online banks, asset managers, and issuers.

Melanie Kottas v. Heldenberg of Smart Wealth AG said: "We are very proud to offer the first security token which enables our clients to easily invest in our AI-based multi asset flag ship portfolio of liquid stocks and ETFs while benefiting from blockchain technology."

"This allows our clinets self-custody of the security tokens in their own wallets with the safety net of a BaFin crypto register," she stated.

The advantages of the Electronic Securities Act (eWpG) and security tokenization are:

  • The leading legal framework of the Electronic Securities Act anticipates European MiCA and makes it future-proof.
  • Regulatory best practices for tokenizing assets.
  • Official list of crypto securities maintained by the German regulatory authority BaFin.
  • Possibility of recovering the blockchain register in case of loss through the regulated crypto register.
  • There is no issuer risk for the customer due to issuance by a segregated Luxembourg compartment.
  • The customer can store the security token directly in their personal wallet.
  • Placement rules for securities, such as MiFID II, local laws, etc., also apply to security tokens.

According to Heldenberg, tokenizing traditional investment strategies is a significant challenge that requires years of pioneering work in the legal, IT, and asset management fields.

The process of issuing a security token needs to solve new, previously unresolved problems. This requires joint efforts from regulatory authorities, online banks, asset managers, and issuers, she noted.

She pointed out that security tokens were the safest bet as these are issued through a distributed ledger system.

Three essential aspects are required for its issuance:

  • Designation as a crypto security.
  • Publication in the official register.
  • Notification to the supervisory authority.
  • Due to registration in a regulated register and the new issuance process, the new crypto securities are referred to as security tokens.

Security tokens enable new paths in finance, offering direct interaction with investors and barrier-free issuance processes, said Heldenberg.

These security token solutions are best suited for those who have acquired significant cryptocurrency and stablecoin holdings and are open to blockchain investments.

"Due to the high correlation between cryptocurrencies, many customers seek suitable investments in traditional assets such as liquid stocks and ETFs while continuing to hold their assets on the blockchain to avoid higher fees, default risks, and maintain full control and transparency over their investments," she explained.

Instead of purchasing a security through Clearstream, the customer acquires a security token through a smart contract, she added

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