by Trent Rhode
In parts one, two and three of this series, we explored what security tokens and Security Token Offerings are, what some of their challenges are moving forward, and looked at some of the problems they might solve compared to traditional financing models as well as Initial Coin Offerings (ICOs).
It is unclear how existing and upcoming STO platforms will address the problems or capitalize upon the opportunities that STOs may bring to the investments scene. With the blockchain-based financial and investment markets in their infancy, many companies are just starting up (or like Coinbase, just beginning to enter the securities scene).
We can, however, get an idea of the potential for the growth of the market by taking a look at some of the current projects joining the fray.
Polymath: a protocol to facilitate issuance of legally compliant security tokens, with all of the legal requirements for securities included.
Swarm Fund: a platform for tokenizing real-world assets using the SRC20 protocol, a cryptographic standard for security tokens, and for listing security tokens for sale.
Harbor: an open-source platform to help traditional investments migrate onto the blockchain, streamlining regulatory compliance. The platform uses Reg D-compliant private sales.
Securitize: a regulatory compliant service for making security tokens, streamlining investor registration in KYC/AML and other legal requirements.
Jibrel Network: creates currencies, equities, commodities and other financial assets and instruments as standard ERC-20 tokens on the Ethereum blockchain.
Coinbase: the popular cryptocurrency exchange has recently indicated that it is acquiring three licensed securities trading companies in an effort to become a regulated platform offering security token trading.
tZERO: handles traditional equities but is planning on expanding its operations to securities token trading. Their tZERO token is an ERC20 security token paying 10% of gross revenues to token holders.
OpenFinance Network (OFN): an open-source platform offering trading, clearing and settlement. Recently, they have created a legally compliant standard for security tokens to be exchanged and eventually issued using the blockchain.
AmbiSafe/Orderbook: a decentralized exchange that automates investor verification, cross-referencing local jurisdiction requirement with a database of token holder information.
Bancor: offers liquidity for tokens connecting multiple tokens to a single pool of capital. Bancor has a partnership with SPiCE VC, a tokenized VC fund wherein SPiCE VC will hold up to 5% of its capital on the Bancor network to provide liquidity to token holders.
The Gibraltar Blockchain Exchange (GBX): describes itself as an institutional-grade token sale platform and digital asset exchange. Although they describe tokens on the platform as “Utility Tokens”, they could offer Security Tokens in the future, and currently list only vetted, legally compliant tokens.
Hybrid Issuance/Exchange Platforms
Templum: a regulatory compliant platform for security token issuance and trading already registered as an alternative trading system (ATS) and a broker-dealer.
Securrency: a regulatory compliant platform for trading or transferring security tokens, offering services such as KYC/AML, investor eligibility confirmation, and tax services.
Vaultbank: a stock trading platform set to launch in October 2018 that also plans to include crypto trading and issuance of security tokens.
Besides the above issuance platforms and exchanges, there are also a smattering of existing tokenized securities, including those for BCap (Blockchain Capital), Science Blockchain, Lottery.com, SPiCE VC, 22X Fund, PropertyCoin, and others.
To go back to what we covered in parts 1 to 3 of this series: Hopefully the above existing platforms will evolve or new ones will emerge that offer clear, extensive information and investment-worthy business plans on projects that cater to both large and smaller investors, allowing anyone to participate, while also either eliminating pre-sales or putting in place reasonable lock-in periods that restrict how quickly investors can sell their tokens.
As these platforms come online and/or mature, we will get an increasingly clear picture as to what potential effect they may have on traditional securities markets. Will they herald a new way of raising funds for individuals, organizations, and communities, or will they simply be a tool for the further concentration of wealth and stifling of innovation in technologies or business models that may challenge the current economic status quo?
The potential for new crowd funding mechanisms to be born of Security Token Offerings that allow small investors, communities, or groups to launch new enterprises making up a new sharing economy is real. However, we must be careful not to allow the movement to be co-opted by big business, big banks and big government, while also not throwing the baby out with the bathwater and rejecting some of the more critical aspects of traditional investment offerings.
Author BioTrent is a professional writer and editor with over 10 years of experience writing on various topics. With a background and education in Journalism, and a passion for decentralization of global power structures, his writing has recently focused on making blockchain and cryptocurrency related topics easy to understand at Unhashed.com, but he also enjoys writing about ecology, agriculture, sustainability, health and wellness, homesteading, business, economics and finance.