FAQ Category Name: Tokenization

Tokenization FAQs

List of Questions (9)

What is Soft Cap and Hard Cap?

Soft Cap and Hard Cap are the goals that are aimed during the fundraising process in STO or ICO projects. The soft cap is the minimum amount of money or lower limit of the amount to be raised and the Hard Cap is the maximum or absolute upper limit of the amount to be raised during fundraising. If the ICO or STO project receives the amount more than the hard cap, the excess funds are returned to the investors. If a project doesn’t reach the soft cap, then the project might be considered as a failure but still, funds are returned sometimes. However, there is an ambiguity in soft cap terms and conditions of ICOs.

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What are asset-backed tokens?

An asset-backed token can be a financial instrument or a service or a financial product. Asset-backed tokens are controlled within an accounting system where they are stored, managed and issued by the service provider or by the organization that stores physical goods like banks. Each token represents a fixed amount of goods or services in the 1:1 ratio that is guaranteed by the custodian entity. For example, One token may represent 1 gram of gold, one square meter of a real estate property, or even 1/1000 part of any precious art piece. If the underlying asset is considered a security, the token can be categorized as security token.,

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What is the difference between the ownership of a real asset and ownership of a token supported by that asset?

The difference is quite clear about these two terms. The difference lies in the physical location of the assets. Tokenization of the ownership of the real asset doesn’t mean that the physical location of the asset is shifted physically by which the token is backed.

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What are the Issuance platforms?

Issuance platforms provide all the essential tools and assistance to create, issue and launch security tokens. Most of the issuance platforms provide the issuers` necessary support with KYC and AML regulatory processes as well. Crypto Capital Access Platform(CCAP), is one of the leading compliant tokenization platform.

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What is meant by security?

Security is referred for assets including currency notes, bonds, treasury stocks, security futures, options, transferable shares, and investment contracts.

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What are KYC/AML regulations and how are they relevant to securities offerings?

The business firms who want to issue security tokens must comply with KYC/AML regulations and federal laws. AML or the Anti-Money Laundering regulations are the regulatory compliances that help to trace and report any financial suspicious activities that include money laundering, securities frauds, heists, market manipulations, or even financing the terrorists among others. KYC or Know your Customers are an integral part of the AML regulations that include the verification of the customer’s identity and other essential details before offering him financial services.

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Who are the custodians and what do they do?

Custodians are the Third-party Service providers that supervise and guard the security tokens representing the legal owners of the digital assets. Custodians thus minimize the risk of thefts or any other loss.

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Is it possible to have multiple investors in a single property?

Yes multiple investors in a single property are possible through the crowd investment business model which is part of the tokenization process. The investment share of the particular investor in the listing price of the property depends on the amount of the investment. For example, if an investor invests 20% of the listing price of the property, then he will get 20% ownership rights of the tokens issued in that specific property or asset.

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What is tokenized of real estate?

Tokenized real estate asset is the property or a constructed building that issues tokens or digital shares as a representation of the fragmented ownership of that asset to the investors.

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