Recently as reported by coingape media Dr. Craig S Wright, an Australian computer scientist, and businessman who also identifies himself as Satoshi Nakamoto took to Twitter, stating that the ‘Stocks and shares on Blockchain Add Zero Value to Users’.The usefulness of STOs has been a topic of debate for some now and there are mixed opinions when it comes to STOs vs tokenized securities. Experts mark Security Token Offerings as a new trend in cryptocurrency funding campaigns. Here’s a few things you need to know about STOs and what you can expect in 2019.
“The tokenization of the economy, for me, is real”- Daniel Pinto
J.P. Morgan’s co-president Daniel Pinto stated: “The tokenization of the economy, for me, is real. Cryptocurrencies are real but not in the current form.”
First, you need to understand how a security token is different than a utility token. Security tokens create a bridge between traditional finance like venture capital (VC) and new technologies like blockchain. Utility tokens have a specific in-app purpose. They either serve as payment for certain services or as a symbol of access to certain tech.
Although most utility tokens are traded on cryptocurrency exchanges, their main purpose is not to provide gains for investors. Utility tokens rely on the liquidity of being listed on exchanges, so it’s difficult to convert them into cash. Security tokens solve these issues.
Being backed by assets such as an equity, shares or commodities, security tokens are subject to security regulations which most developed nations already have. A higher liquidity, the ability of turning into cash, and an entry to new technology investments are amongst the many appeals of security tokens.
Can STOs live up to their promise?
As manifested by Josh Stein, the CEO of Harbor, a security token represents a real tangible right to ownership in a company. He admits that they contain the same investor agreement on paper that you get when participating as a backer of a startup. The advantage is that by making your participation on blockchain it can be issued and traded on a large scale faster, cheaper, and easier.
Still, amongst the new blockchain startups conducting fundraising only a minority are STOs. This leads to another area of strength where security tokens outmatch utility tokens – legal compliance.
Security tokens are compliant with federal securities laws, while ICO issuers are selling basically unregistered securities. People who purchased ICO tokens can only use them to get access to some future product. And investors of security tokens have more tangible economic rights to the underlying asset – equity, or a portion of future revenues or profits.
Is STOs a more mature token offering or just another Jargon in market?
The fact that security tokens and STOs outpace ICOs is undeniable. They offer the most adequate type of control, regulation, and liquidity to their investments and, best of all, any startup can choose to host their own, given they meet registration requirements.
For Anton Dzyatkovkiy, Co-founder of Platinum, a company providing services for STO, ICO, and IEO, these kinds of token offerings are here to stay. “Security tokens are not just a trend. They represent the next standard for transforming capital markets worldwide. 2017 was the year of ICOs and 2018 the year of regulations catching up to them. What we will see in 2019 with STOs is a much more mature and promising market. And we are prepared,” he stated.
With so many opinions on what is the next big thing for 2019 in cryptocurrencies it’s surprising to see so much consensus on STOs. The market and funding for startups are ready to become the best kind of ally with traditional VC and Seed Capital investments. After all, 2018 was a special year with important lessons for everyone watching and participating in the crypto market.