However, unlike cryptocurrency, STOs are a whole different ball game. To deal with securities, you need licenses and proper infrastructures to accommodate the trading and custody of these regulated assets.

Why is this important?

When trading security tokens, you are trading a right of ownership or claim to an asset in the real world. Without the proper infrastructure and licenses, security token investors take the risk that the legal ownership of these assets is not transferred when traded.

Similarly, given that security tokens are regulated assets, improper handling of these assets without required licensing may cause detriment to the business, disrupting business activity.

• The US regulator alleged that Kik’s ICO flouted investment and securities law
• The US Securities and Exchange Commission (SEC) has issued a cease and desist order against Shipchain and ordered it to pay a penalty of $2.05 million

So how does IX Swap overcome these challenges?

Similar to the Uniswap model, a liquidity provider stakes liquidity by depositing two sides of a trade. In the example below, the liquidity provider inputs 50% of Token A and 50% of IXS tokens and receives LP tokens in return.

Subsequently, through programming of the smart contract, Token A will be sent to the third-party custodian for safekeeping whilst a wrapper token, let’s call it wToken A, is minted by the platform.

This newly minted wToken A is placed in a liquidity pool for trading. These wrapped tokens are then traded within the pool. The same process is reversed upon withdrawal of these STO assets.

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Through licensed custodians and licensed broker-dealers, IX Swap creates an ecosystem that ensures a safe and proper trading environment allowing security token investors to participate in this shared ecosystem.