Commentary by Stephan Blohm, Board Member at securities.lu.
Luxembourg, 12 February 2025 – Recent setbacks have done little to dampen enthusiasm for cryptocurrencies, as prices continue their march toward new record highs. The rush is on. Yet, upon closer examination, many of these steep gains lack fundamental substance. Securitised security tokens, however, offer this solid foundation.
The current climate feels like the peak of a gold rush: Bitcoin, the world’s leading cryptocurrency, remains remarkably stable at around USD 100,000, despite recent market turbulence. That’s more than 2.5 times its value at the beginning of last year. Meanwhile, Strategy (formerly MicroStrategy) has once again expanded its Bitcoin holdings on a massive scale. Adding to the speculation, rumours abound that the new US administration is considering establishing a strategic Bitcoin reserve – a move that could send prices soaring even higher. With all eyes on potential gains, investors are piling in, driven by the hope of ever-rising prices.
The crypto boom continues to flood the market with new digital currencies, each vying for attention. Crypto enthusiasts, often driven by influencer hype, eagerly jump on the bandwagon in pursuit of returns that outshine even Bitcoin. However, history has shown that rapid price surges are often followed by equally dramatic crashes, as many of these coins are built on nothing more than speculation. They lack intrinsic value. The recent case of the $Trump meme coin exemplifies this trend. Yet, despite such cautionary tales, the gold rush mentality persists, luring both issuers and investors into launching or backing new crypto products.
But beyond the hype and volatility, blockchain technology offers a stable and efficient foundation for serious financial instruments. Enter security tokens – digital securities that blend the trusted characteristics of traditional financial assets, like stocks and bonds, with the efficiency of blockchain technology. Through tokenisation, previously illiquid assets – such as real property, fine art or infrastructure projects – become easily tradable. Transactions are secure, cost-effective and transparent on the blockchain. Here, substance prevails over speculation, proving that the future of digital finance lies not in fleeting trends but in real, tangible value.
If security tokens are securitised under Luxembourg law, they operate within a regulated framework, ensuring legal certainty and investor protection. The Luxembourg Securitisation Act provides a robust legal structure for asset securitisation, applicable to both traditional financial instruments and tokenised securities.
Securitisation through security tokens backed by tangible assets creates blockchain-based financial instruments with a solid foundation. While these instruments exist in the same decentralised ecosystem as Bitcoin and other cryptocurrencies, they are fundamentally different. A security token’s value appreciation is directly linked to the underlying asset’s performance, offering transparency and intrinsic worth. This sharply contrasts with the often speculative price surges seen in cryptocurrencies, where valuation is frequently driven by market hype, speculative trading and the pursuit of quick profits.
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