Digital Securities Vs Physical Securities: Which Is Better?

Digital securities are the electronic form of financial securities such as stocks, bonds, etc. They are also known as security tokens. Physical securities, on the other hand, are financial securities that are in the physical form such as equity contracts, cash, etc. These were used to buy and sell equities before security tokens were introduced and are relatively less popular now.

As a beginner, it is quite easy to be confused about these two forms of financial securities.

However, to help you get further clarity, here’s a brief comparison between digital securities and physical securities -

·       Digital securities are more convenient

Since buying financial security with just a few clicks is way more convenient than physically buying an equity contract, digital securities have made the capital markets much more accessible to the masses. Buying securities in the olden days meant you receive a physical copy of your contract/transaction receipt. This increased the time taken to buy and sell various financial securities and also made it mandatory to maintain a paper trail of the same.

·       Physical securities are typically more expensive

As many of the public capital markets are regulated, physical securities require a costly intermediary structure to maintain records and coordinate with the brokers. Digital securities, however, make this easy on the pocket as they have the compliance code programmed into them. This removes the need of maintaining the vast data physically and thus brings down the cost of the transaction for all the parties involved in the transaction, i.e., the broker, the investor, the security issuer, and the regulatory body.

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