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What is Accounting Token?
Accounting tokens are best understood when blockchain is viewed as a “distributed ledger.” They are a viable alternative to stablecoins, assisting businesses in remaining compliant. Stablecoins are a regulator’s worst nightmare since they function similarly to currency and may be used anonymously and worldwide. As a result, several authorities regard stablecoins as if they were financial goods, strictly regulating their use.
Understanding Accounting Token
Accounting tokens, like any spreadsheet-based accounting system, are essentially tokenized credit or debit entries (IOU/UOM). They serve merely to symbolize the amount of money due by the token holder in accounting. Because it is not backed by FIAT like stablecoins, it cannot be considered a financial product. With a restricted number of settlement partners, this technique works well. In fact, if the quantity is small enough, the entire procedure can be settled on the blockchain using the token’s smart contract. Accounting tokens do not have to represent simply currency; they can also represent commodities or services equal to the recorded value, similar to a good old-fashioned coupon. In practice, they function similarly to coupons.
This method is also incredibly secure and compliant due to the nature of blockchain technology. Businesses can limit potential token holders by adopting a KYC/AML procedure, adding paperwork, and keeping the entire process transparent on a public blockchain, because that is exactly what these tokens are – credit/debit entries on a distributed ledger.
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