First, lets get everybody up to speed. ICOs (Inintial Coin Offerings) are SO last year. STOs (Security Token Offerings) are IN! So, what’s the big deal? Well, a security token bridges the gap separating traditional financial markets and the crypto markets. Think of it this way. Rather than owning 100 shares of IBM, you own a token representing the same ownership and rights – a tokenized security. So, again, what’s the big deal? Well, by tokenizing, the ownership transfer settlement becomes instantaneous, at a cheaper cost and is more secure. But don’t take my word for it. Here’s a great article that goes into more depth on the wave of the future – institutions entering the tokenized world.
(Bill Taylor/Fintek Capital)
“The cryptocurrency market and initial coin offerings (ICOs) have carved out a grey area for regulatory efforts in the United States. For example, utility tokens (user owned tokens that are not created as investment vehicles and hold a claim that they are exempt from federal laws that govern securities) are the primary tokens circulating most ICOs. Owners of utility tokens can’t use the coins outside of the platform without exchanging them; they can send tokens person to person within the network.
ICOs must evolve to become self-regulatory, in order to advance the crypto market and become attractive to institutional investors. It’s not uncommon to find that the majority of companies selling utility tokens don’t have token economics. Therefore, most listed utility tokens are not real utility tokens, but rather, these companies are actually selling security tokens. Due to this problem, many institutional investors have been bearish on this new market…
…“Tokenized securities are bridging the gap between traditional financial markets and crypto markets because they are aligned with everyone’s interest. Regulators want to protect the investors, investors want their assets tradable, and crowds from all over the world want to invest in the most promising startups at an early stage,” Laimonas Noreika, CEO and founder of Desico, a platform launching next year for retail investors to invest in Security Token Offerings (STOs), told me.
Tokenized securities enable the ownership of token transference over blockchain technology so that tokens can be viewed as “digital assets.” Anthony Pompliano (Founder & Partner at Morgan Creek Digital Assets) describes tokenized securities as, “digital assets subject to federal security regulations…”