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Updated: Dec 6, 2018

Shares are transferable securities. However, the transfer of not tokenized shares involves certain formalities, which complicates trading in a digital world. Typically, the transfer of shares requires a written instrument (and sometimes the delivery of physical certificate), or the credit and debit of securities accounts kept by banks or other custodians.

Tokenizing shares makes it possible to transfer these securities by electronic means, without a signed document or the involvement of a bank or of another professional custodian being required. It simplifies the process through which securities can be sold to investors and makes it possible for issues to raise capital simply. Also, compared to the digital tokens that are issued in the context of traditional “Initial coin offerings” (ICOs) and which incorporate bespoke contractual claims against the issues, tokenized shares have the advantage of representing financial instruments that are well known to investors, that are governed by a clear legal framework, and that investors can consequently understand without significant work.

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