How Blockchain’s Creating the New Financial System
Justin’s note: All week, we’ve been sharing the top money-making opportunities for 2019 from our experts here at Casey Research. On Monday, E.B. Tucker showed us why legal sports betting is about to explode… Tuesday, Nick Giambruno explained why now is the perfect time to invest in marijuana stocks… and yesterday, Dave Forest told us that a commodities boom for the ages is underway…
Today, in our final installment, we turn to our blockchain guru Marco Wutzer. Marco says the blockchain will create a new financial system. Below, he shares specific reasons why this trend will only accelerate – and explains how you can start taking advantage today.
The year was 1763.
The brutal Seven Years’ War for supremacy in Europe, and control of colonies in India and the Caribbean, had just ended.
Prussia had emerged as a major power in Europe. But the war had dealt a heavy blow to Prussia’s aristocrats… They were broke.
Fast-forward to August 29, 1769.
To ease financial distress, the King of Prussia, Frederick the Great, signed into law a new financial instrument that would turn things around… and grow into a major new asset class.
That instrument was the Pfandbrief.
A Pfandbrief is a bond that is backed by a mortgage. Today, we call them covered bonds.
[A covered bond involves three parties: a creditor, a bank, and an investor. The bank accepts the creditor’s estate as collateral and issues a mortgage. On the other side of the transaction is an investor buying a bond issued by the bank and backed (covered) by the mortgage.]
For the first time, it allowed aristocrats, churches, and monasteries to raise money by pledging their estates as security to investors.
This securitization of real estate made the real estate’s inherent value easily accessible and interchangeable for cash.
It created liquidity where there was none before, delivering enormous value to the owners of these assets.
When markets become more liquid, they allow an economy to grow and prosper.
That’s why this new liquidity mechanism was a major key to rebuilding Prussia. And from these humble beginnings emerged what is now Europe’s $2.5 trillion market for covered bonds.
Now we are on the cusp of another financial innovation similar to the Pfandbrief…
As you know, we are moving towards mass adoption of blockchain technology.
That involves managing all sorts of physical and digital assets on decentralized, distributed ledgers. Let me show you why this is so valuable…
Barriers to Exchange
You might think global financial markets are already as liquid as possible. But this is only true for organizations that are part of the legacy financial system.
I’m talking about financial institutions such as banks, brokers, and insurance companies.
Individuals and businesses that want to make use of the legacy financial system are forced to go through an increasingly suffocating, bureaucratic nightmare.
This includes “Know Your Customer” documentation and arbitrary “Anti-Money Laundering” rules.
All sorts of contracts and disclaimers need to be signed. Commissions and fees have to be paid. Middlemen have to be trusted. And Big Brother will put all sorts of restrictions and limitations in place.
In short, bureaucracies are growing increasingly out of control almost everywhere, creating friction for the global economy, and decreasing liquidity.
Not to mention the billions of people who don’t have access to bank accounts, property titles, or even identity documents.
This is about to change.
A Truly Free Market
Right now, there are trillions of dollars in assets worldwide that are essentially “dead capital.”
If an asset cannot be easily traded or used as collateral to borrow against, the only benefit that remains lies in its use. It cannot be leveraged to create new wealth.
New financial instruments are needed that can bring this dead capital to life…
Something that connects these assets to the rest of the financial system – like the Pfandbrief did back in the eighteenth century.
Currently, ownership is almost always linked to some kind of paper certificate. This is cumbersome, inefficient, and outdated.
That’s where blockchain technology comes in…
It has made digital ownership records feasible, allowing more and more of them to move from analog to digital.
Digital records on blockchains are a lot cheaper. Transactions can happen much faster, and a blockchain’s decentralized, distributed architecture is more secure. Middlemen, geographic restrictions, and financial restrictions are being removed.
And of course, the younger demographics are already growing up with digital technology and have an expectation of increasing digitalization of outdated processes.
That’s why we are in the very early stages of a big shift towards what we call “tokenization of assets.” In short, all kinds of securities and certificates are becoming digital tokens (aka “coins”) on blockchains.
[Tokenization is the process of creating a legal bridge between a real-world asset and blockchains. Just as we take a share certificate, digitize it, and trade it online, using blockchains, you can do something similar for assets such as artwork and collectibles.]
A New Financial System
The race is on to build a fully compliant tokenization platform where any asset or business project can quickly and easily raise funds from anyone and list, manage, and trade tokens.
An initial public offering that makes shares in a company available to the public by listing them on a stock exchange takes months… and hundreds of thousands, or even millions of dollars in legal expenses and listing fees.
In other words, it is not an option for most small and medium-sized businesses or start-ups.
But a new breed of tokenization platforms will eventually make it feasible to list any business or asset, no matter how small.
I recently talked to a friend of mine who is a Venture Partner at the Stuttgart Stock Exchange (Börse Stuttgart), the second-largest exchange in Germany, and majority owner of EUWAX, the largest exchange for derivatives in Europe.
The Stuttgart Stock Exchange is betting heavily on cryptocurrencies and is about to roll out its own crypto wallet and trading application in 2019. But the crypto trading platform is just the first step.
I learned from my friend that the exchange is also working on building its own tokenization platform, and it is expected that there will be many such platforms in the near future.
So not only will Stuttgart cover the trading of different cryptos, but it will also offer a platform for the creation of new tokens.
Similarly, the Gibraltar Stock Exchange is building the Gibraltar Blockchain Exchange (GBX). The GBX aims to become a leading token sale platform and exchange.
These are just two examples of new token sale platforms and digital asset exchanges coming to market. Soon, there will be hundreds – if not thousands – of such platforms, and any business or asset can easily become tokenized.
I expect several of these new tokenization platforms to become available, and 2019 will see an explosion in new tokens and many additional platforms.
That’s because blockchain technology is removing a lot of the friction inherent to the legacy financial system. And it’s allowing trillions of dollars of illiquid assets to become more accessible.
As this process unfolds, we’ll end up with a whole new financial system.
A system that is more open, where assets are available to anyone with an internet connection. A system that looks much more like a truly free market.
And opportunities for the smart speculator abound.
If you want to take advantage of this shift, the first step is to buy some bitcoin or ether. With these cryptos, you’ll be able to buy all of the other blockchain projects.
To disruptive profits,
Justin’s note: Marco’s Disruptive Profits newsletter is unlike any other cryptocurrency advisory I’ve ever seen. Marco scours the crypto markets to find the highest-quality projects for his readers… ones that you won’t hear about from the mainstream media. To learn how you can become a Disruptive Profits subscriber and access all of Marco’s research, click here.
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