Security tokens allow traditional investors to enter the cryptomarket while adhering to current government standards. These tokens are preprogrammed with integrated regulatory requirements. As a result of this integration, security tokens are the perfect fit for the tokenization of certain assets.
Gaining a better understanding of each type of token, and how it functions, helps you to be a better-informed investor. As different assets require different legal requirements, its only natural that different types of security tokens emerged. Today there are four main types of security tokens in use in the market.
Equity security tokens represent ownership rights to a particular asset. These tokens can represent ownership in a physical asset such as a percentage of profits from real estate investments. Additionally, these tokens fit perfectly with digital assets as well. Consequently, this is the most common type of security token in the market at this time.
Bond security tokens provide owners with a fixed income, over a predetermined time period. The best example of this type of token is a fixed loan. The issuer of the loan is entitled to receive their interest and principal payments until the completion of the loan. Bond security tokens make it possible to crowdfund loans.
Real Estate Asset
Real estate tokens come in two varieties. The first type of real estate token encountered in the market represents ownership of a property. Tokenizing real estate provides more liquidity to investors. It also allows for the crowdfunding of investment properties via the blockchain. Harbor is one firm that specializes in these tasks.
The second type of real estate-based security token is a debt-type asset. In this scenario, the rent paid for a particular investment property undergoes tokenization. In this manner, smart contracts can automate the collection and distribution of the rent among the investment parties.
Commodity-based security tokens represent investments in bulk commodities such as gold, silver, wheat, or oil. Tokenizing these items allows more investors to participate in the market. As a result, token holders can rent out their ownership rights to third-parties once they have been tokenized.
SEC Steps into the Market
Recently, the SEC has taken a more hands-on approach to the growing security token marketplace. This increased involvement in the market has created a scenario where companies are now seeking to work for hand and hand with the SEC on their crypto projects.
One example of this scenario occurred this week when the security token platform TokenSoft Inc. invested in a major SEC-compliant broker-dealer. Tokensoft isn’t alone in their proactive approach to this situation. Last week, Satang Corp. revealed plans to host an STO (security token offering) in Thailand with the blessings of their local government.
The 4 Most Common Types of Security Tokens
Security tokens are revolutionizing the way we conduct business on a global scale. These unique blockchain based protocols provide traditional investors with a safe way to enter the cryptomarket. You should expect increased adoption as investors continue to learn about the benefits security tokens provide.
A Look at the Silicon Valley Coin
The San Francisco-based venture capital firm, Andra Capital raised eyebrows across the market after announcing plans to host its Silicon Valley Coin (SVC) STO in the coming weeks. The funds raised via the STO will go towards the expansion of the company’s Open-Ended Technology Fund. The news demonstrates further security token usage in the US market, as well as, a desire to leverage blockchain technology to improve crowdfunding strategies.
The news officially broke on Jan. 22, 2020 via a company press release. In the release, Andra Capital described the purpose and concept of the Silicon Valley Coin. The firm cited the ability to provide investors higher returns and lower risks over a shorter investment period as one of the main focuses of the project.
Open-Ended Technology Fund
The Open-Ended Technology Fund is unique in many aspects. For one, the fund specifically targets companies in their hyper-growth phase. In this way, fund managers are able to combine a late-stage investment strategy with a perpetual VC structure that incorporates tradeable interests leveraged by the latest technology.
Additionally, Andra Capital incorporated world-class service providers into the equation as a way to ensure the success of their project. For example, Andra Capital decided to partner with the Tezos Foundation to make the concept a reality. As such, Andra Capital decided to utilize the Tezos Blockchain for the project.
Tezos was a smart fit for the project because the firm provides Andra Capital access to global investors. Additionally, Tezos utilizes institutional-grade security features. Features such as formal verification streamline the entire investor onboarding process.
Notably, Tezos utilizes a Proof-of-Stake (PoS) consensus algorithm to secure its blockchain. This style of consensus is far more energy-efficient than traditional Proof-of-Work systems such as the one utilized by Bitcoin. Importantly, Tezos supports secure smart contracts and features a unique live upgrade process. This ability to do live upgrades is ideal for long-term, high-value applications.
For their part, TokenSoft will provide access to its proprietary tokenization technology. These tasks will include the integration of KYC and AML smart contract protocols. These compliance mechanisms help qualify retail investors. Also, TokenSoft will both issue SVC and host the SVC STO.
Speaking on the new partnerships, Sam Raman, Head of Strategic Partnerships at Andra Capital called his partners “best-in-class providers.” He touched on their past successes and how each firm can provide their unique expertise in digital securities to better the overall project.
Silicon Valley Coin (SVC)
The Silicon Valley Coin (SVC) is a regulatory compliant, asset-backed, and tradeable security token. Each token represents a unit of interest in the Andra Capital Open-Ended Fund. Investors receive dividends equal to the percentage of tokens they hold in the fund. SVC tokens cannot be traded or transferred without first meeting KYC and AML restrictions.
Silicon Valley Coin (SVC) – A New Token in the Field
Andra Capital definitely did their homework prior to the launch of this project. The firm managed to partner with some of the biggest names in the industry to bring their concept to life. It will be interesting to watch this STO launch considering the amount of positioning each partner holds in the market. For now, the security token sector just got a new VC fund.
3 More Executives Leave SDX Due to Discrepencies
The blockchain-based digital asset trading venue SDX continues to have a rough start to the new year. This week, another high-level executive announced their departure from the firm. The news brings the number of executives who left the company in January 2020 up to three. The news demonstrates a realignment and shuffling of SDX’s business plan. Also, it showcases the growing pains associated with these changes
According to company documentation, all of these executives departed from their full-time positions in January. The three individuals to leave are Alex Zinder, an architecture lead at SDX, Ivo Sauter, SDX’s head of clients and products, and Sven Roth, the firm’s chief digital officer. The later of the trio agreed to stay on as an external advisor to SDX.
In a recent interview, Sauter explained the motivation behind his decision to leave. He touched on a number of critical changes made throughout the firm. These changes included a shift from the platform’s original vision. He explained that at first, the platform was to utilize the banking sector as a bridge into the rest of the market.
However, this strategy quickly changed as SDX began to tailor its platform specifically, and solely for use by banks. Sauter described how these changes effected moral and fueled the growing dis-alignment between executives and owners. He explained that originally, the platform was to be much more inclusive. For example, SDX was to enable startups to provide services around its features.
Sauter also took a moment to touch on the negative effects this corporate culture had on the project. He explained that, in his opinion, a bit more separation needed to occur between SDX and its mother company, the Swiss stock exchange operator SIX Group. Apparently, these feelings of discourse only grew as the mother company took more and more influence on SDX’s day to day operations.
Additionally, Sauter explained how the big-company approach also inhibited the company’s ability to save. Large corporations require much more reporting. In turn, this reporting raises operating costs. Additionally, smaller firms have more liberty in terms of flexibility and risk management. In the end, the corporate approach made many of the executives feel as if they had been stifled.
Despite the discrepancies, Sauter stated that he had left on good terms. He went as far as to claim that he was at a point in his career that he had no desire to have his contract renewed. Consequently, SDX chose to not offer a renewal.
Challenges in the Market
As with any major corporate reshuffle, there are going to be individuals that no longer fall in line with the platform’s overall goals. Discussing these challenges, a SIX spokesman touched on the changes and what they mean to the project. They explained that whenever you have a concept built from scratch, there are going to be many ups-and-downs associated with the development. In the end, the firm acknowledged that these changes have begun to add up with the spokesperson stating that the firm has “spent quite a few Swiss francs” on the ordeal.
SDX Moving Forward
From the tone of SDX’s past employees, the company is undergoing some heavy internal changes. As such, there is no way to determine exactly how these personnel changes will affect the overall strategy the company has chosen to follow. One thing is for sure, SDX appears to have made a priority shift towards servicing the banking sector exclusively with its new platform.
SEC Charges Opporty for 2018 ICO
This week, the Securities and Exchange Commission (SEC) continued its ICO crackdown. This time, the firm levied charges against project Opporty Founder and Brooklyn-resident Sergii Grybniak. The firm alleges that Grybniak broke the law when his firm raised approximately $600,000 during its 2018 ICO.
News of the charges first broke via Jan. 21 press release. In the release, the SEC reveals the charges laid against Grybniak in detail. Importantly, the primary charge is participating in the unregistered sale of securities. Additionally, the SEC claims that Grybniak made false statements in order to encourage more investor participation.
These statements include a myriad of exaggerated and completely fake claims. In one instance, Opporty claimed that its 2018 ICO was “100% SEC-compliant.” Unfortunately, this claim proved to be the tip of the iceberg. Apparently, Opporty also claimed to have thousands of “verified providers” who were ready to work with the platform.
This claim became so overblown that in one piece of marketing material, Opporty suggested it had a business database that included around 17 million participants. In actuality, the firm had no partnerships. Unfortunately, these claims served one main purpose, to push more investment capital into the ICO.
Major Software Firm
As if the shower of lies put forth weren’t enough, Opporty also made some very specific partnership claims that proved to be bunk as well. According to the SEC, the firm lied about a partnership with a major software company. This lie was to help ease investor doubt about the ability of developers to deliver on their hefty platform promises.
SEC Steps In – Opporty
It doesn’t take much research to see why Opporty ended up in the SEC’s crosshairs. Now, the SEC seeks injunctions against all future digital offerings by the company. On top of the cease-and-desist, regulators require Opporty to return all the funds the company raised during its 2018 ICO. Also, the firm is to face a variety of civil penalties for its actions.
Opporty executives sold the concept to investors as a blockchain-based ecosystem for small businesses. The platform was to provide these small-to-medium sized companies with access to advanced blockchain systems. For example, businesses could list their services and lock in their clients via smart contracts.
United States Investors
Aside from the obvious scamming that took place, Opporty made another key error in its strategy. You see, unlike many similar ICOs, the offering did not explicitly exclude U.S. investors from participating. The 2018 ICO included investments from around 200 US citizens. In this way, the firm invited the SEC to monitor its actions throughout its entire crowdfunding campaign.
An Oppurty Lost
Given the long list of violations this firm now faces, it’s easy to imagine a scenario in which Opporty decides to close its doors. Already, numerous SEC-charged firms have taken similar measures prior to refunding clients’ funds. For now, Opporty has a long legal battle and hefty fines to deal with. You can expect to hear more from this case as the SEC pursues its charges against Grybniak.