Security tokens provide investors with a more secure means of participating in the cryptomarket. In its current state, the crypto space lacks regulations. While many crypto investors see this lack of regulation as liberating, large-scale investors need a more secure foundation to be in place before making their investments. These requirements are the exact niche that security coins fill.
Security coins head off future regulations by incorporating today’s financial system requirements into their platform. These requirements include Know Your Customer (KYC) and Anti-Money Laundering protocols. This legal strategy provides investors with more confidence. It also makes the cryptomarket a more attractive investment to large corporations. Let’s take a moment to answer the question – Where can I buy security tokens?
Open Finance entered the market in 2014, making the platform a pioneer in the tokenization sector. The platform developed thanks to the concerted efforts of exchange technologists, securities lawyers, and experience crypto traders. The goal of the platform is to bring more transparency and interoperability into the cryptomarket.
Open Finance partnered with Harbor to increase both firms reach in the sector. Open Finance offers a streamline compliance system. Additionally, the firm partnered with multiple financial institutions. These strategic partnerships help Open Finance provide direct integration into their platform.
Open Finance is live but currently only accepts US investors. The interesting thing is that Open Finance is powered by:
The 0x protocol provides crypto users with an integrated exchange system designed explicitly for Ethereum-based tokens. Ethereum leads the cryptomarket regarding new token creation with both their ERC-20 and ERC-721 protocols seeing growing adoption globally. The 0x protocol allows security tokens transference while remaining completely compliant.
0x is by far the most popular security token protocol in use today. The platform utilizes a combination of features including an integrated API protocol that enables users to aggregate liquidity pools for their digital assets.
In the future more exchanges will be launching using this protocol.
tZero is one of the first security token exchanges available to the public. The concept behind the tZero platform is simple. The developers wanted to provide investors with a blockchain-based alternative to the current financial processes found on Wall Street and other institutional structures.
tZero incorporates a 15c3-5 risk management software that enables users by providing them with a mix of proprietary technology aimed at improving their trading capabilities. Additionally, the platform includes DLR software to ensure all participants are SEC compliant.
tZero is currently under development and is the most anticipated exchange in the space.
While the above companies offer exchanges to purchase security tokens, there are several market leaders who are focusing on assisting companies with launching these tokens. These companies are:
The Polymath platform tackles these concerns by instituting a compliant protocol into their token development. Polymath utilizes the ST-20 protocol. ST-20 lives on the Ethereum blockchain. The protocol includes built-in KYC/AML checks.
Polymath gained popularity as a smart option for tokenized property such as real estate. The transfer of real-world property via token sales requires conformity to the current legal regulations governing the item for sale. You need a regulated token to transfer to transfer regulated assets.
The San Francisco-based tokenization platform, Harbor shares similarities with Polymath in that it is also mostly used for the tokenization of real-world assets. These assets can include real estate, private securities, investment funds, company equity, fine art, and the list goes on. The platform requires KYC and AML compliance for all participants across the global economy.
The Harbor platform differs from Polymath at the protocol level. Harbor utilizes the popular ERC-20 protocol. Harbor utilizes the R-token to accomplish these tasks. R-tokens are open-source and regulatory compliant from issuance to secondary trades.
A More Secure Way to Do Business
Security tokens continue to gain popularity as the cryptomarket expands. The digitization of the economy pushed these tokens into mainstream use. Now, crypto users have an alternative to the unregulated nature of the industry. You should expect to see increased development in this sector as more compliance regulations come into play.
PWC & Crypto Valley Association Release Yearly STO Market Report
As the STO market continues to expand, reporting has now taken center stage with investors and companies seeking more insight into the intricacies of the market, This week, PricewaterhouseCoopers (PwC) Strategy Switzerland and The Crypto Valley Association released their highly-anticipated Spring 2020 STO/ICO market report.
This twelve-page document is packed with insightful information to help guide investors and blockchain firms moving forward. Importantly, the report features an easy-to-read layout complete with graphics and tables to help you better understand the statistics. Blockchain-based firms rely on this yearly overview to get a new perspective on developments within the initial coin offering (ICO) and security token offering (STO) markets.
PWC & Crypto Valley Association – Real Insight
The study includes all types of data that would be useful to professionals in the sector. For example, you can see items such as the total number of offerings or what countries are the leading hubs for blockchain crowdfunding projects. Additionally, you can see statistics on how governments, corporations, and traditional banks utilized blockchain or distributed ledger technology (DLT) to tokenize financial instruments such as securities.
The report shed some light on last year’s market movements. For one, the data suggests that the overall volume of token launches dropped about midway through 2019. In total, the report identifies 380 token offerings that completed throughout last year. These offerings raised a combined total of around USD$4.1 billion.
Initial Exchange Offerings – PWC & Crypto Valley Association
Uniquely, the report also had a section dedicated to initial exchange offerings (IEOs). These new financial instruments saw a significant increase in use during the later part of the year. Notably, the report shows that the Bitfinex IEO led the pack with a total of $1 billion in funds raised.
The study also highlighted the institutional infrastructure and emerging regulatory framework seen in the sector. These regulations helped to spur more blockchain participation from traditional entities such as banks and governments. The report points out that the Austrian Government, World Bank, Daimler, and Bank of China all directly-issued tokenized assets. These assets included securities, bonds, loans, and commodities.
Regional Statistics – PWC & Crypto Valley Association
The PWC report also gave some insight into the geographic regions with the most successful blockchain projects launched. The USA, Singapore, and Hong Kong led the pack with strong positioning across the market. Additionally, some smaller countries made it into the top spots such as the British Virgin Islands and the Cayman Islands. Both of these locations hosted major events in 2019 including the EOS and Telegram ICOs.
Europe also saw significant growth in the market. The study pointed to Switzerland and the U.K as the leading hubs in the region. Also, Estonia took a top spot for its continued development of the country’s blockchain market.
The PWC analysis will work as a guiding light for companies seeking to expand their blockchain positioning in 2020. This yearly report continues to produce insightful and valuable market insight. In turn, you should expect to see more firms depend on this data to make the right tokenized crowdfunding decisions.
Security Tokens to Headline the Crypto World Summit
In another sign of the times changing for the better, this year’s Crypto World Summit will focus heavily on the security token market. This year also marks the 4th consecutive year for the forum which focuses on the most important blockchain-related issues globally. The news marks a shift by the Crypto World Summit from traditional blockchain projects, over to heavily regulated digital assets.
According to a recent press release this year’s event will commence at the world-famous Sheraton New York Times Square Hotel. The event’s official start date is February 20th, 2020. Event coordinators confirmed that the majority of speaking sessions will focus on a number of movements related to security tokens and STOs.
As such, speakers will discuss the major roadblocks to adoption in detail. These primary concerns usually fall into three main categories. Firstly is a lack of understanding of the existing SEC laws, rules, and regulations regarding tokenized assets. From here, discussions will include a synopsis of the lack of regulatory framework specifically tailored to these new financial tools. Finally, speakers will discuss how to address these primary issues in a logical manner.
Crypto World Summit Sessions
The Crypto World Summit will feature some amazing insight into the current state and future of the security token sector. One of the most exciting sessions listed on the event is a forum called -The Revolution of Tokenization. This discussion will touch on the overall benefits achieved through tokenization, and how they can improve the overall health and security of markets.
Additionally, there is another session labeled the Securitization of Illiquid Assets. This discussion will touch on how tokenization creates new forms of liquidity in the market. Importantly, the discussion will explain how these new markets will affect the overall global economy and investors in general.
Security Token Offerings
From there, conference attendees can gain some valuable insight into STOs. STOs are seen as the natural evolution of the ICO sector. These fully-compliant token offerings are now more popular than ever. Developers hope to shed some light as to why these crowdfunding campaigns surpass traditional IPOs and ICOs.
Blockchain and Real Estate
No security token seminar would be complete without an in-depth discussion on the effects of tokenized real estate in the market. Tokenized real estate is one of the fastest-growing security token sectors internationally. Tokenizing properties provide some huge advantages over traditional real estate sales such as lowering the entry threshold. Additionally, this strategy allows for global investor participation and crowdfunding of single properties.
The Digital Banking Industry
Another session labeled, The Digital Banking Industry is sure to touch on the development of new-age banks focused on catering to digital asset holders. Already, a number of these organizations have sprung up across the globe. These unique banking institutions seek to provide digital asset holders with many of the benefits and features found in the traditional banking sector.
Perhaps the most interesting forum to be held at the Crypto World Summit is the tokenization workshop. Here, visitors will learn exactly what it takes to tokenize a real-world asset. The workshop promises to provide valuable insight into the technical aspects and legal ramifications surrounding the tokenization of particular assets such as debt-equity.
Join the Crypto World Summit
For those interested in participating in this monumental event, but are unable to visit New York, there are options. The entire conference is set to be live-streamed via Fintech World Media. In other words, there really is no excuse to miss out on this exciting event.
What are Digital Securities?
Digital securities continue to see further adoption by traditional investment firms for many reasons. These tokens remove many of the barriers encountered by investors and streamline the entire security process from issuance to oversight. Additionally, they provide new market opportunities to nonliquidable investments. For all these reasons and many more, security tokens are here to stay.
Digital securities, or security tokens, come in many forms. All of these forms share one thing in common, they are digital representations of securities, and therefore, subject to traditional securities laws. Importantly, not all digital assets are security tokens.
Security tokens emerged at the tail end of the 2017 bull market run in response to the rising amount of fraud in the space. Investors lost billions on Ponzi schemes such as Bitconnect. Real projects needed a way to distinguish their tokens from the scamsters and traditional investment firms needed to utilize blockchain technology in a regulated manner.
Digital Securities are Born
Digital securities can represent all types of assets including investment contracts, shares of a corporation, a portion of a note, debt security, or even a fractionalized interest. Basically, any electronically registered and transferable debt, equity, or asset that issues or trades using blockchain technology is a security token.
Benefits of Digital Securities
The benefits blockchain technology brings to the sector are immense. For one, ownership is verified and recorded on a distributed ledger. This provides a more secure alternative than traditional methods. Additionally, blockchain technology allows for the transfer of private and non-listed alternative assets. Consequently, security tokens provide more opportunity, efficiency, and liquidity in the market.
Security tokens wouldn’t exist if smart contracts never entered the scene. These preprogrammed protocols can be developed directly into the token. This strategy allows for the automatic enforcement of all regulations. Basically, smart contracts help eliminate much of the redundant paper-based processes currently in use.
Types of Digital Securities
Today, there are more types of security tokens than ever before. The market continues to develop as more advantageous tokenization concepts emerge. You should expect to see this trend continue as security tokens lend themselves perfectly to many markets. Below are the most common types of digital securities in use today.
The real estate sector experienced an explosion of tokenization strategies over the last year. Both developers and tokenization platforms went all-in on tokenizing property. Tokenized real estate has some clear advantages. For one, it allows for the sale to be fractionalized. This strategy lowers the entry-level for investors and provides more opportunities for diversification.
The tokenization platform Polymath made headlines in September 2018 after inking a partnership with the real estate development firm BlockEstate. As part of the strategy, the Block Estate Alpha Token, or BEAT was born. This token utilized Polymaths unique Ethereum token standard ST-20 to ensure that the project remained compliant. Each token represented a share in the ownership of the fund.
Perhaps one of the most popular ways in which digital securities see use is venture capital. Security token offerings (STOs) provide business with all the benefits of blockchain technology such as global reach, added security, and instant trackability. Additionally, STOs allow companies to stay within the regulatory guidelines of their industry and region when hosting a crowdfunding event.
Private equity is another type of security token that continues to see more adoption in the space. These security tokens can also go by the name equity tokens. Equity token offerings (ETO) are more popular than ever before because tokenized equity provides more liquidity in the market.
One of the best features of tokenization is that it can be applied to so many types of assets. Real assets such as gold or diamonds already live on the blockchain. Not surprisingly, these tokens were among the first type of security tokens to emerge.
While the concept of tokenizing assets like gold isn’t anything new to the market per se, the ramifications of these maneuvers are evident. For one, tokenization platforms now seek to not just tokenize gold but to utilize the gold tethered token as a new form of stablecoin.
Stablecoins are coin tethered to real-world assets such as the USD, or in this scenario, gold. These tokens allow users to get the benefits of cryptocurrency but avoid all of the volatility found in the market today.
Tokenized hedge funds are another perfect example of digital securities. Hedge funds are a great way to diversify your portfolio. Traditional hedge funds are restricted in their trading times and the methods used to transfer these assets are outdated. Tokenized hedge funds create a frictionless experience for investors.
The Protos Hedge Fund includes a number of the top cryptocurrencies in existence. The fund sold $6.5 million during its primary issuance. Notably, Protos was the first licensed tokenized hedge fund to trade on an Alternative Trading System (ATS) in the US.
Digital Securities – A Bright Future
Now that you understand what digital securities are, its easy to see why they continue to see adoption in the market. These new-age financial tools provide more investment opportunities and reduce the workload and costs usually associated with these transactions. You can expect to see security tokens become more popular as these advantages become common investment knowledge.