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The Coinone research notes that STOs can open new frontiers with better security over ICOs, and thus help to liquidate other illiquid assets.
The Initial Coin Offerings (ICOs) dominated the crypto industry in 2017 and early 2018 as a means to launch new digital tokens in the crypto market. ICOs turned out to be an easy way for projects to raising fund by tapping the crypto mania. However, scammers exploited the lack of regulation in this sector while even selling fake digital tokens to naive and gullible investors.
It looks like the ICO-industry is set for a transitional shift to be taken over by the growing use of security token offerings (STOs). While looking at the ongoing substantial regulatory changes, the latest research from South Korea shows that STOs will dominate the crypto space in 2019.
South Korea has outrightly banned ICOs last year in 2017 citing notorious activities and lack of investor protection in this sector. However, there were certain proposals last year, from South Korean lawmakers, to legalize ICOs.
Security Token Offerings Substituting ICOs
Security Tokens could prove to be a better substitute for ICOs. This is because unlike most of the digital tokens, security tokens are backed by physical assets. In terms of their operations, STOs work very similarly to stocks, bonds, and derivatives. Thus STOs are more like buying a digital stake in physical assets. This way of functioning is likely to bring more trust among investors for owning digital tokens when compared to ICOs.
The latest report from Business Korea shows that according to the country’s leading blockchain research centers: Coinone Research Center and Chain Partners’ CP Research, STOs will emerge as the next big thing for the crypto industry.
Coinone Research notes that the growth of STOs will help to liquidate illiquid assets like art and real estate. The research notes that 2019 will emerge as the year of setting up the STO infrastructure and foundation. The same research also mentions that STO market is estimated to grow to $2 trillion by 2030.
Coinone also notes that the real estate and venture capital industries have already started the tokenization of their funds. However, Coinone says that the current regulatory rules can prove to be a hindrance for STOs going further. It is essential for both – the industry players and regulatory bodies – to align their views and arrive at a mutual consensus. The Coinone research notes:
“STOs which focus only on the liquidation of assets will eventually create a lemon market where only worthless assets are traded. Concentrating only on the possibility of liquidation is a dangerous thought.”
On the other hand, the research also provides a warning that STOs might lead to a 2008 economic crash as in the case of mortgage-based securities. The research in meant only for the purpose of providing the Korean government with some inputs to make STO-specific regulations.
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