Security tokens are being advertised as the next big thing in the world of cryptocurrency. While the SEC has basically said that every token issuance is a security even though the company’s claim to be a utility token.
Security tokens may represent shares in a company or provide dividends and are generally thought of as being much more similar to traditional shares. Basically, an investment of money where there is some kind of expectation of a profit on the other end.
The big difference between security tokens and the utility tokens maybe that the securities fall under a very heavy scrutiny and regulation than the utility token industry. Many Initial Coin Offerings do have a hard time finding the actual difference and are almost always somewhere in the middle of those two definitions.
Blockchain and Securities Market
The potential for Blockchain to disrupt the Securities Market is massive. Firstly, Blockchain will offer complete transparency for regulators who can verify transactions on the blockchain, thus making KYC and AML much easier. Blockchain will also reduce the market manipulation due to increased transparency of who has what. Blockchain can lower the friction cost by 90% and also massively lower the transaction time. This offers a potential to have a massive influx of liquidity coming to the securities market by tokenizing everything.
Security tokens will make capital investing truly global by inviting a much wider range of investors. It will introduce a huge degree of multi-asset interoperability which will all be storable on your ledger. The disruption of blockchain to the securities market could be compared to what email did to the postal system.
While there is a lot of hype about security tokens, the industry is still in its absolute initial stages. However, the Security Token Offering boom could be much bigger than the Initial Coin Offering boom ever was.
What are your thoughts on security token offerings? Tell us in the comments section below.