Security Tokens as a Local Investment Option for Individual Investors

Project Local Investment Options for Individual Investors: Analysis and Evaluation of Security Tokens as a Business Model for German Cooperative Banks
Duration Aug 2023 – Jan 2024
Funding DZ BANK Stiftung
Participating companies Blockchain Research Lab
Contact person Dr. Lennart Ante

Projektbeschreibung:

The research project funded by the DZ BANK Stiftung aims to analyze and evaluate the potential of security tokens in the context of issuing and distributing local securities for private investors. In particular, the project investigates to what extent security tokens could be used as a promising future business model by cooperative banks.

At the current time, individual investors are generally unable to invest in securities issued by smaller, local companies due to the high effort and complexity involved in the issuance process. Blockchain-based security tokens offer an efficient way to securely and comparatively inexpensively represent fine-grained, more specific or local securities. Consequently, their use could unlock market potential to fill investment and financing gaps. The use of security tokens by cooperative banks opens up special opportunities for the establishment of new business areas, since cooperative banks are characterized by a dense branch network and long-standing relationships with local companies and customers.

Within the scope of the research project, the market potential and the needs of customers for local securities investments will be analyzed by means of an interview study. In addition, the requirements for market development and the role of the cooperative bank in the issuance and management of local securities will be analyzed.

Publications:

Executive Project Summary

Local Investment Options for Private Investors – Security Tokens as a Business Model for Cooperative Banks

Executive summary: This study explores the potential of blockchain-based security tokens as a business model for cooperative banks, aiming to facilitate capital market access for small and medium-sized enterprises (SMEs) and provide private investors with opportunities for regional investments. Due to the “proximity bias,” a preference for geographically or culturally close businesses, SMEs are particularly attractive to investors. The findings reveal a strong interest in investing in local and regional companies, especially when social responsibility and sustainability are emphasized. Security tokens present an innovative solution to make capital markets more accessible to SMEs. Cooperative banks could play a key role as intermediaries by offering the issuance and management of such tokens, thus creating a platform for regional investments. The study identifies both opportunities and challenges of introducing security tokens and provides recommendations for integrating digital technologies into the business model of cooperative banks.

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