Initial Coin offerings, ICO surged in 2017 due to the improved performance of cryptocurrency in the year. However, the extended bear market and the increasing regulatory concern over fraudulent incidents cause a decline to ICOs.
Security Token Offerings Rising Beyond Initial Coin Offerings
According to a report from fabric Ventures, more than 58 percent of all ICOs in 2018 failed to raise the desired set capital. The same report indicates that some ICOs disappeared or refunded participants. ICOs became a darling to cryptocurrency startup companies during the 2017 cryptocurrency boom. The period was characterized by many successfully ICOs and high performance of cryptocurrencies.
The decline in the successes of ICO opens the door to a new type of token offering, the Security Token Offering (STO). US stock market player, NASDAQ predicts that STO will take center stage for fundraising in 2019. Another report revealed that the potential market for security tokens is estimated at about $24 trillion dollars. A broad range of financial assets and blockchain startups are expected to participate in STO next year.
A Security Token is a cryptographic token that shares the profits, pays dividends or pays interest to the token holder. Earnings from STOs is based on an underlying asset such as shares, real estate or art collections. STO is different from Utility tokens in that. A user can use Utility tokens to purchase a good or service offering by the issuer of the particular cryptocurrency.
The successes ICO gained last year caused an increase in the number of other tokenized financial assets that significantly became popular too. However, the future of security tokens depends heavily on the structure of the regulatory environment. In the meantime, many countries are still not clear about the future of crypto fundraisings including ICOs and STOs.
Cryptocurrency Regulatory Climate Worldwide
In the United States, ICOs considers as regulatory grey area. The countries exchange and security commission comments several times that most ICOs are similar to security offerings. Meanwhile, recent attempts by many companies to trade Bitcoin Futures on exchanges are yet to get an approval of the commission.
Meanwhile, in China, the government launched a crackdown on cryptocurrency, ICOs and Blockchain platforms. However, blockchain projects not directly relating to cryptocurrency gets spare. Since the government its self-encourages blockchain initiatives in the country. The negativity associated with some ICOs created a bad regulatory for future ICOs.
However, STOs have a better appeal to regulators. With Security Token Offerings, it is easy to implement regulatory checkpoints such as Know your Customers (KYC) and Anti-money Laundering (AML). ICOs, on the other hand, did not care for any of these, as users would wire their investment capital via a cryptocurrency anonymously.
Even though STO would be more favored by regulators because of its regulatory compliances, it does comply with the Satoshi vision. The Satoshi vision is the slogan that advocates for decentralization and financial freedom. However with the average failures of many ICOs crypto enthusiast. It could not risk losses any longer in dubious ICO yet more secure STO option is available.
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