The crypto sphere took the world by storm in 2017 when we saw the overall cryptocurrency market cap surge by some 800 per cent. ICOs across the world raised billions of USD over the past two years and although we are currently facing a bear market, we can be confident that crypto is here to stay.
I say this backed with 17 years of experience in institutional trading and brokerage. Once the institutional “smart money” enters the market, we will see a liquidity pool difficult to imagine at the current stage. The way towards this scenario is the tokenisation of securities.
Security Token Offerings (STOs) are innovative in the sense that they are mitigating a number of known issues with traditional securities trading due to the transparency of the digital ledger technologies. With the right regulations in place, we will be able to tokenize stocks, bonds, futures, swaps, equities, and so on – all on distributed ledgers.
A number of exchanges are currently looking towards becoming regulated to be able to list STOs, including: The Gibraltar Stock Exchange, Coinbase, Templum, SharesPost, the Australian Securities Exchange, the Malta Stock Exchange, SIX Swiss Exchange, the LSE, and ZBX – the Malta-based exchange I am been proud to have been managing since earlier this year.
Among other leading financial jurisdictions, such as the UK, Switzerland and Singapore, Malta is at the forefront of the industry and we envisage being fully regulated by the Malta Financial Services Authority for STO-listing in 2019. The benefits of Malta for STO-licensing are multiple. Malta has flexible fund licences, timely licence issuances, attractive tax structure, and comparatively low operational costs.
Although STO is certainly becoming somewhat of a buzzword in recent months, they are not as easy to launch as an ICO. Regulations on STOs are far tighter. The liquidity prospects for these markets, however, have much more potential due to their attractiveness as an investment opportunity for institutional investors. Some analysts estimate that the STO sector will be worth some 10 trillion USD by as soon as 2020.
In order to successfully launch an STO, I believe it is fair to say that your company should already have a stable cash flow, in the range of 10 million USD in annual revenue, is internationally established, and hungry for additional liquidity for your token – a lot of liquidity.
In the end, it is the financial supervisory authorities who will decide if your token is a security or not. Given that the US SEC has gone after a number of ICOs in late 2018, I believe it is fair to say that listing an STO on a regulated exchange provides much-needed security for both investors and startups alike. This can also have a mitigating effect on the typical pump-and-dump patterns of many ICOs and provide your project with investors who are in it for the long run.
Finalizing my thoughts on 2018, which has undoubtedly been a tough year for ICOs, I believe 2019 will be the year when the crypto sphere matures further following the wild days of 2017. We will see a number of prominent projects breaking through critical thresholds for adoption and a crypto trading market which will come to resemble more traditional financial markets. That being said, it is important not to veer too far away from the initial objective of blockchain technology: To promote independence and financial sovereignty through decentralization.
This, I believe, will be the most difficult balancing act for the major players in the field, as we move towards regulated markets and consolidations. Let 2019 be the year when crypto markets returns to full strength in a more reliable shape.