The rise of the Security Token is here. 2017 showed how valuable the utility market could be in the future, and 2018 and 2019 will certainly bring about an entirely new sub-industry of market actors entering the space looking to capitalize tokenized securities. The Security Token is being hailed for its amalgamation of blockchain technology and traditional financial compliance.
What are Security Tokens?
Security tokens are tokens focused on being fully compliant with SEC regulations. One of the largest issues in the United States regarding utility tokens was the uncertainty of the legality of the use and offering the utility token. Indeed, regulators have stepped up efforts to combat token distribution that is not compliance, e.g., Operation Cryptosweep. Security Tokens are able to provide equity, dividends, profit share rights, voting rights, etc., to investors without the regulatory concern. Essentailyl, the tokens, rather than hailed for their functionality, are considered important to provide a right to an underlying asset. These rights are written into a smart contract and the tokens are traded on a blockchain-powered exchange.
Security Token Offerings:
Advantages of tokenization include fractionalization of larger assets, increased liquidity, lower issuance fees, and greater market efficiency. However, the greatest benefit that security tokens provide an issuer is access to a global pool of capital. As these tokens can be sold and traded internationally (when compliant with regulations), they become more fairly priced and, therefore, attractive to investors. This SEC compliant offering is appealing to both institutional investors for it’s more recognizable structure, and to crypto investors for its technological innovation.
Overall, this outgrowth of the traditional token market could substantially disrupt our traditional financial markets because of the capital, liquidity, and security associated with these tokens and platforms the tokens will be traded on. From a regulatory standpoint, the United States will most certainly enforce traditional regulatory procedures, which means accreditation will be required to purchase the tokens, and traditional licensing will be required for traders, brokers, funds, and exchanges. You can think of it as a regulatory compromise to the uncertainty embedded in the currency token market from a regulatory perspective.
Current Platforms:
Polymath
Harbor
Securitize
Swarm Fund
Templum
Securrency
tZERO
OpenFinance Network
AmbiSafe/Orderbook
Bancor
Airswap
BCap (Blockchain Capital)
Science Blockchain
Lottery.com
SPiCE VC
22X Fund
PropertyCoin
Siafunds
Slice