2018 brings an end to ICO and the introductions of SECURITY TOKENS
TAO ( Token Asset Offering )
The market can now clearly divide the two types of TOKENS
Utility Token
-this is great for companies who have already a points system or token built
-has a large user/community/users in their platform
-no secondary exchange for the token
Security Token
-for all companies globally
-you must use an exemption that is allowed in the country which you are selling your tokens
Hi @oscar Yes, I think Legacy Finance has Equity + Debt. Blockchain Finance has Equity + Utility Token. The latter is as much about marketing as it is about capital raising and a well designed Utility Token has a big impact on Equity value.
I am going to take the opposite side of this argument. Too many people are promoting STO’s with absolutely no understanding of the hazards involved.
No company with under US$10 million in revenue/year has any business even considering launching as a regulated security. Having previously had a company destroyed by trading on the OTCBB, I have great experience in what happens to small cap companies that allow themselves to be traded on markets. If your token has any liquidity at all, sophisticated investors will find that they can make more money by killing your business quickly than the believers will have stomach for over the long term. You don’t need STOs for this. Just look at penny stocks. These are the kinds of psychopathic traders you are going to be exposed to, and they have absolutely no concern about you. To them, you and your company are just disposable resources.
Unless you have fantastic revenues to fend off an attack, you are going to be destroyed. It is one thing when this happens on a utility token, but when this happens on a security token which is tied to your company, you will quickly find the regulations disallow many options from escaping from this trap and your ability to raise money is severely compromised. You will be forced into toxic financing which results in a death spiral.
I find it inexcusable that many advisors with no experience in small cap securities are advising startups to do tradable securities via STOs. This is an absolutely horrible idea, and will definitely lead to advisors themselves needing to be regulated. The damage to the industry is going to be an order of magnitude worse than the relatively minor damage done from scams in utility ICOs
STO’s are not the answer. That light you think you see is actually a train coming at you.
I am with @oscar on this one. STO need transparent data, but given that the market will take care of it. There are bad entrepreneurs and bad investors in any marketplace, but also good ones. A shrinking equity base and a market duopoly (NYSE/NASDAQ) is not healthy.
Was the report sponsored by the companies described? It is a perfectly viable way to pay for but disclosure makes it more credible. It seems to ignore TZero which is a big player in any objective analysis.
No, the report wasn’t sponsored by any company. We just reached out to representatives of the companies and talked to them about the market. The only reason some of the big players are missing in this report is they refused to talk to us.
Daily Fintech currently has over 24,000 subscribers in 199 countries who are leaders in Financial Institutions, Startups, Investment Funds, Consulting firms and Regulators. Our Authors are senior executives, entrepreneurs, investors and deal-makers who write from experience.
Not sure about tzero specifically, that one wasn’t on me. Reasons were different: no time for talk, asking for commission, simply ignoring messages…
Its very disappointing to see a report like this that is suppose to be neutral but only covers one chain, and more importantly the one chain that will not survive in the Digital Securities Market.
Would be great to see TRUE research and understands and provides proper Research that is not one sided
Excited to receive your comments, as your opinion means a lot to us.
You are right that we were trying to cover the whole picture not digging deeper as it was our first research on the topic.
We appreciate your time, if you don’t mind we would like to ask you a few questions about your profound expertise and significant experience in alternative finance.
Please let me know if you are interested in an interview
The financial capital markets are in one of the biggest disruptions in history.
The capital markets are in two parts:
Private capital markets
Public capital markets
and these subtle distinctions are important to not confuse the audience.
as well there is very big differences between
Crypto
and Digital Securities ( securities token, tokenized securities
different regulations
different licensing for operators
different trading rules, restrictions etc
Exchanges vs ATS/Secondary market why in Private capital markets you cannot use the word “Exchange”
The private capital markets globally is the most fragmented and the biggest opportunity for disruption:
1, you need to follow current securities laws in each of the countries around the world
2. you need to understand, regulatory requirements from investors perspective, regulated issuance platform perspective, secondary market platform, transfer agent and digital securities protocol
Once you have the full picture can you now understand what technology is suited to distrupt, without hype of BS.
Wave 1
ICO/STO
2016-2018 according the EU report on 09 January 2019,
78% pure fraud
off the remaining 22% only 3% remain in business
Wave 2
ICO now pretending to be experts in Securities laws
Wave 3 March 2019
Early entrants getting regulated and switching chains
Secondary Markets like Templum switch from Ethereum to permission based
There is more than one chain in the market:
Ethereum is great a crypto currency
it’s not for SECURITIES Laws,
don’t get the move from permissionless to permissioned. Can you elaborate?
When it comes to SECURITIES Laws, that currently exist, permissionless will not work, as is not capable of following current securities laws, and all the regulatory requirements.
Example: Templum was based on Ethereum, in order for them to maintain their ATS license in the USA and meet all the requirements have now moved away from Ethereum to a permissioned based chain.
Some say Tokens don’t include voting/governance. I know they can but do they?
This is false, when a company tokenizes its securities, it will have all the same attributes that the securities have
@oscar Thanks for your comments. Having gone through all of your remarks about the regulation I couldn’t help but notice a major issue. The issue deals with the pace at which security tokens are adopted as opposed to how current regulatory constraints are inherently stable.
For instance, there is a requirement for a transfer agent to be centralized, this is precisely what DLT tries to avoid. No matter what speed a particular transaction can reach it is not settled without actual record maintenance from the transfer agent, and this is done for a reason I suppose.
And what about the privacy concerns, how does blockchain transparency affect security ownership information? Will we get more detailed information on who owns what and under what circumstances? This for sure will impact speculative trading and in short perspective might bring uncertainties to the market sentiment.
Bottom line, the real question is if we have outraced ourselves and we need regulations adjustments immediately? Or if we need to adjust our perception of implementation of blockchain in accordance to the regulations since regulations are still appropriate and the logic behind them is rock solid?
If you use a chain like Fabric, you can meet all the regulatory obligations for
Issuers
Broker Dealers
ATS Operators
Transfer Agents
and be 100% on chain…
Fabric today has just that:
a Digital Securities Protocol that is globally compliant
a Transfer Agent
Broker Dealers
ATS Operator, Secondary Market
Fabric ecosystem in the financial capital markets is more established and it provides all the regulatory requirements while bringing major efficiencies
To change or create new securities laws: if the process got started today working with regulators its at least 5 years away to remove some of the regulatory requirements that are currently in place.
I personally do not see regulators making those changes when faced with reports of fraudulent activities such as ICO/STO 78% fraud.
Investors are not trusting this either, they want Governance, and Compliance and the technology at this point has not delivered on either of these two points.