CH2_5_Bearer verse Ledger Ownership

Questions and Answers

What is the main distinction between Bearer Ownership and Ledger Ownership?

Bearer Ownership is always managed by the government.

Ledger Ownership always involves physical assets.

Bearer Ownership cannot be traded.

Bearer Ownership is held in person, while Ledger Ownership is managed by an entity. (correct)

What risk is associated with Ledger Administered Ownership?

The risk of the asset being mismanaged by the state.

The risk of physical asset deterioration.

The risk that the ownership claim will be lost, stolen, or denied. (correct)

The risk of the ownership being transferred without consent.

Which of the following describes Issuance Mode in Financial Subjects?

Exchange of assets between individuals.

A transaction where an issuer creates financial subjects like stocks. (correct)

An entity receiving assets in exchange for printed currency.

Transfer of shares from one investor to another.

In times of conflict, what can happen to Ledger Ownership?

It can be adjusted by conquering powers. Signup and view all the answers

In which mode does the ownership of a financial subject typically occur when the asset is exchanged between non-issuing participants?

Transfer Mode Signup and view all the answers

Why is recognizing Financial Asset Ownership considered complex?

Ownership must appear on the Ledger of an external entity. Signup and view all the answers

What is a key characteristic of Bearer Ownership compared to Ledger Ownership?

It does not need to be recorded on a ledger. Signup and view all the answers

Which statement accurately reflects the implications of Transfer Mode?

Ownership transfer can occur without the involvement of the issuing entity. Signup and view all the answers

What describes the risk involved with an entity maintaining Ledger Administered Ownership?

Potential for loss of claim due to third-party failure. Signup and view all the answers

What is the primary function of a ledger in the context of Financial Asset Ownership?

To document the issuance and ownership transfer of financial assets. Signup and view all the answers

Which of the following best illustrates the concept of Issuance Mode when it comes to financial assets?

A central bank issuing currency in exchange for government securities. Signup and view all the answers

What type of ownership can create a scenario where the owner has counterparty risk with others?

Both forms can involve counterparty risk under different circumstances. Signup and view all the answers

Study Notes

Ownership Recognition

Ownership can manifest as Bearer Ownership (held personally) or Ledger Ownership (recorded in a ledger).
Ledger Ownership can be centralized (managed by the state) or privately managed (overseen legally by the state).
Entities managing Ledgers include governments (land registries), banks (bank accounts), and public company share registries.

Financial Asset Complexity

Understanding ownership of financial assets is more complicated than physical assets (e.g., houses, cars).
Financial assets must be recorded on the Ledger of an Issuer, who cannot own what they have issued.
Ownership acquisition occurs either directly from the issuer (Issuance Mode) or from another investor (Transfer Mode).

Counterparty Risk

Ledger Administered Ownership carries counterparty risk of loss, theft, or denial.
Bearer Ownership forms allow holders to be their own counterparty, avoiding third-party claims.

Transition Issues in Conflict

Ownership recognition can function smoothly in peacetime but can be easily manipulated during conflict.
Conquering powers may adjust Ledger Ownership and may confiscate Bearer Ownership.

Modes of Financial Transactions

Three modes of transactions for Financial Subjects:
- Issuance Mode: Issuers create subjects in exchange for money.
  - Example: Company shares issued via an IPO.
  - Example: Central Bank notes in exchange for government bonds.
- Transfer Mode: Existing subjects exchanged between non-issuing parties.
  - Example: IPO investor sells shares.
  - Example: Exchange of physical currency.
- Redemption Mode: Issuers buy back subjects.
  - Example: Ownership bought back with money.
  - Example: Notes and coins do not engage in Redemption Mode.

Emergence of Decentralized Ledger Ownership

Recent years have seen the rise of decentralized Ledger Ownership, lacking specific oversight.
Bitcoin represents a new form of money, marking a significant development in financial systems.