In the not-so-distant past, ICOs enjoyed a massive surge in popularity. Yet, because of a number of documented ICO scams and security breaches, the bullish ICO market has petered-out a bit. That said, Security Token Offerings (STOs) have emerged as a new method of raising money for blockchain projects. STOs have the potential to meet the growing demand for both compliance and accountability. In this article, 9 industry experts provide valuable insight as to whether STOs are the new ICO.
Security tokens have the potential to outperform ICOs
“Investors should definitely take note of the fact that security tokens are eating Wall Street. This is for a lot of reasons. While cryptocurrency markets have struggled to regain the momentum following the bear market of 2018, interest in blockchain technology is alive and well. And at the top of the funding food chain, venture capitalists are returning to the crypto markets armed with a new weapon: the security token. Since security tokens are primarily concerned with the ownership of a tangible asset and are purchased based on their potential to appreciate in value, pay dividends, etc., the more this provides a measure of stability and value, VC’s can and will, I predict confidently return to crypto trading in 2019. This on its own indicates the trend that STOs are pretty much the next source of fundraising fire in our innovation ecosystem. It’s also estimated that STO’s will attract more institutional investors than ICO’s did. Many new investors will turn to security token markets to gain exposure to securities, bridging the gap between two investor worlds. Various offerings can be made using this technology: real estate, stocks, art and more. This also applies to tokenizing existing securities. Security tokens have the potential to outperform ICOs in the next 5 years.”
Kirill Bensonoff, CEO, OpenLTV
STOs Will Not Replace ICOs
“STOs will not replace ICOs because they are applicable for a totally different type of companies. An ICO by nature makes sense when the company works on a blockchain related product where a native token can be integrated. An STO, in contrast, is a general method of Fundraising and hence applies for every startup. Choosing the ICO as a blockchain startup can save a lot of Compliance effort, hence ICOs will still exist, but to a smaller extent.”
Max Kops, STO Advsior, Assets on Blockchain
STOs And ICOs Are Simply Marketing Terms
“STOs and ICOs are simply marketing terms for the same thing. Securities laws have always applied to this type of raises and calling it an STO instead of ICO doesn’t change anything. Those are not legal terms, but PR terms and the community has shifted to saying STO is a way to attempt to signify securities compliance and increase investment interest.”
Morvareed Z. Salehpour, Esq., Managing Partner of Salehpour Legal Consulting
STOs Will Gradually Take Over
“I have been an investment adviser and financial planner since 1992, and only recently forayed into cryptocurrency a few years ago (as it is a very young field).
Seeing that there were hundreds, if not thousands, of ICO’s which were all fluff and hot air, I adapted my old stock-market checklist to hunt for quality ICO’s. Fortunately, we found a few.
After sharing the 4-point C.O.I.N. ICO selection criteria with hundreds of friends and associates, many now had increased knowledge but were still time-poor, and wanted someone to do the investing for them.
This is why we created the first crypto ETF, the ‘BostonCoin’. Investors purchased the BostonCoin, and funds were used to invest into 30-50 of the best quality ICO’s. At the time, the term ‘STO’ was not in use. Borrowing terms from the stock market, we called ourselves a ‘crypto-ETF’, or referred to BostonCoin as ‘the coin of coins’.
As many ICO’s are, or have turned out to be, a kind of GoFundMe for dreamers, we believe that STO’s are the way of the future.
Since we started BostonCoin, we have also become aware of other security backed tokens, such as ‘PropertyCoin’, which we like.
We believe there will be limited room for ICO’s and dreamers in the future (just as there is limited room for speculative stocks in the NASDAQ); STOs will gradually take over, as investors like to see some kind of fundamental asset-backing for their money.
In a worldwide downturn, investors will still receive *some* funds back, even if a corporation goes bankrupt (assets held will be sold, and perhaps give a return of a few cents in the dollar). We believe that increasing numbers of investors will be reassured in the crypto space when there is
some form of asset-backing, not just smoke and mirrors or hot air.”
Dr. Jeremy Britton, CFO, Boston Trading Co.
STOs Will Match ICOs In Popularity
“I run a directory for ICO and STO marketing agencies with Bruno Skvorc, so we got some stats you might be interested in. We got stats about the search volume of ICO vs. STO keywords, which aren’t even showing on keyword research tools yet (STOs are still a new thing, so the data isn’t available on public tools).
According to our data, ‘ICO marketing agency’ actually gets much more searches than ‘STO marketing agency.’ ICOs aren’t dead yet, but there’s no doubt that STOs are growing in popularity.
As for the marketing budget of ICOs – they’ve gone down drastically. I’ve spoken to some ICO listing sites and during the ICO glory days, they could charge 50k, 100k for listings, but now they’re struggling to get a few thousand and some listing sites struggle to even get a few hundred dollars per listing.
So overall, yes I think STOs will match ICOs in popularity by this year and could possibly overtake it.”
Winston Nguyen, Marketing Manager, Bitfalls
Growth Of The STO Has Been Slowed By A Lack Of Liquidity
“The STO is the new ICO, but the growth of the STO has been slowed immensely by a lack of liquidity and secondary market options. The biggest advantage of an STO over a traditional private placement of capital was the ability to generate liquidity. Yet as of now there is not ample liquidity in the marketplace, which is slowing the growth of the STO.”
Kyle Asman, Partner and Co-founder, BX3 Capital
STOs Are The Only Way Forward
“It’s clear that Securities Token Offerings (STO) are the only way forward vs. the utility-based, Initial Token Offerings (ICO). Most ICOs should be STOs because they use the fundraising mechanism to fund a new venture or expand an existing operation. This means the tokens are not 100% utility.
Even if the latter is true for 1% of the offering, then the entire fundraiser becomes a securities offering, which is a regulated process and consequently attracts a wider investor community. Also, by doing the STO, the project has a much better chance of clearing regulatory audits and avoiding later regulatory enforcement action. It’s clear that Securities Token Offerings (STO) are the only way forward vs. the utility-based, Initial Token Offerings (ICO). Most ICOs should be STOs because they use the fundraising mechanism to fund a new venture or expand an existing operation. This means the tokens are not 100% utility. Even if the latter is true for 1% of the offering, then the entire fundraiser becomes a securities offering, which is a regulated process and consequently attracts a wider investor community. Also, by doing the STO, the project has a much better chance of clearing regulatory audit and avoiding later regulatory enforcement action.”
Ramak J. Sedigh, Founder and CEO, Plouton Mining
STOs Are The New ICO
“Yes I believe that STOs are the new ICO. While still not as popular as ICOs were during their peak, they are growing in popularity. The reason that they are growing in popularity is that investors want an ownership stake in projects, Utility tokens were nice but investors are now looking for the projects to provide a return/stake rather than hoping to flip the coins they acquired from an ICO.
Over the next year or two, I believe that STO will be the majority of coins issued.”
Henry Stanley, CEO, ICOAxiom.com
STOs Won’t Completely Replace ICOs
“STOs, or security token offerings provide a much safer investment than the standard ICO, or initial coin offering. This is because they are backed by real financial assets. This may be real estate or shares, but can even be something like an art collection. So an STO is really just a secure way of making an investment on a certain set of assets. I suspect STOs will gain popularity, especially after the abysmal year cryptocurrency suffered in 2018. Over half of the ICOs in 2018 made no money for buyers, so people will be looking for something more secure, like STOs. That said, I think the two occupy separate realms of investment. Because, while the STO is safer, it is unlikely to ever achieve the types of gains seen by Bitcoin, because they are backed by a relatively stable asset. So investors seeking a riskier, but possibly more lucrative investment, may still seek out ICOs. In short, I don’t see STOs completely replacing ICOs.”
Chane Steiner, CEO, Crediful
Suffice it to say, there is no definitive answer as to whether or not STOs will replace ICOs as the fundraising method of choice for blockchain projects. Yet, as the industry matures, it is imperative that a legitimate form of fundraising is created that embraces accountability and compliance. Do you think STOs will replace ICOs? Let us know by commenting below.