Security tokens offer a path for investors and SMEs in trade finance

It has long been established that there is more demand for capital in the multi-trillion dollar trade finance industry than there is capital available. The capital supplied by the small number of investment banks in this field tends to reach only the large, well-established trading firms around the world. And the complex system to gain credit with one of these banks is generally out of reach to the small-medium-sized enterprises, the SMEs. 

Blockchain, specifically the XDC Network, offers a viable platform for creative solutions to this problem. One novel approach would be to create regulated, asset-backed security tokens. The tokens would represent the value of trade finance assets that are packaged in blocks or tranches. A rate of return would be assigned, and ultimately the token could be traded on the secondary market for both institutional and retail investors.

There are many regulations within global trade, and industry adoption will only occur with well thought-out and properly governed tokens. With the XDC Network’s security, speed, scalability, low transaction cost, as well as its participants' experience in the trade finance industry, a properly structured asset-backed security token grants a new level of participation in trade finance.

Liquidity for the trade finance gap

Trade finance assets are widely considered as low-risk and are, therefore, attractive to institutional investors. A security token that represents the value of packaged trade finance assets would make these assets available to a broader investment community, including private and retail investors.

With a broader investment pool, the growing $1.7 trillion trade finance gap that affects small-to-medium sized enterprises (SMEs) should begin to shrink. This trade finance gap has been problematic to SMEs who have seen their businesses suffer without access to capital that their larger competitors have long been able to enjoy.

TRADA Token Solution

The TRADA Token is one such example of a trade finance-backed security token built on the XDC Network. It is designed to provide scalable access to trade finance assets in a secure, decentralized, and cost-efficient manner.

With more on-chain innovations, like regulated security token offerings (STOs) and trade finance assets tokenized into NFTs, retail investors, along with institutions, may now gain access to a $19 trillion trade finance sector.

By extension, supply chain constrictions could ease somewhat as more trading partners become active, allowing a new class of participants to level the playing field in global trade.

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XDCTEQ is a public limited liability company formed by World Economic Forum member, Tradeteq. The TRADA token was launched in July, 2022. 

TRADA is a liquidity token that works by digitizing and fractionalizing large trade invoices and invoice portfolios to make them investable. An Issuance Prospectus establishes a portfolio’s minimum size requirements. The digitized portfolio is then associated with its corresponding TRADA