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Perspectives28 June 2023

World-wide first Security Token of an AI-based Multi-Asset Investment Strategy on the Blockchain

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Melanie Kottas von Heldenberg


28 June 2023




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Smart Wealth now makes its flagship Multi Asset Global Rotation AMC (CH0590207988), one of the world's best-performing multi-asset products since its launch on February 21, 2021, available to customers through a regulated security token with its own ISIN LU2623993461 on the blockchain. 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. As pioneers in asset management tokenization, Smart Wealth and Chartered Investment are proud to jointly realize the first security token of a traditional multi-asset portfolio in accordance with the Electronic Securities Act (eWpG) and BaFin regulations.

smartwealth blog image"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, which allows self-custody of the security tokens in their own wallet with the safety net of a BaFin crypto register."

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.

What are security tokens?

A crypto security is an electronic security registered in a crypto securities register and represents a subset of electronic securities.

Three essential aspects are required for 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.

Why security tokens?

  • Security tokens are issued through a distributed ledger system.
  • Security tokens enable new paths in finance, offering direct interaction with investors and barrier-free issuance processes.
  • Our customers can search for transactions, blocks, wallet addresses, smart contracts, and other on-chain data on the Etherscan network to verify the deployment of a security token in their wallet.

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.

Who are our security token solutions best suited for, and what benefits do they bring to our customers?

  • Customers 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.
  • Instead of purchasing a security through Clearstream, the customer acquires a security token through a smart contract.
  • The security token, having its own ISIN and registered with BaFin, is transferred to and stored in the customer's personal wallet.