The Security Token Technology Stack
Ethereum and the ERC-20 standard kick-started the smart contract era of public blockchains and established an enormous following among developers globally.
It also catalyzed the explosion in ICO (initial coin offering) issuance which occurred during the 2016/17 boom.
While this included an enormous misallocation of capital and bad actors, it also created a new paradigm for capital formation.
Compliance Is Key
Security tokens have the potential to capture the benefits of ICOs but within a regulatory framework which minimizes compliance costs and maximizes compliance.
This would occur through integration of security standards and regulations at the token level.
The emergence of regulatory-compliant tokens in conjunction with highly scalable and interoperable blockchain networks would facilitate new security token issuance which could be extremely strong and rapid.
It also has the potential to catalyze the growth of new digital asset institutions alongside the likes of Coinbase and other new entrants.
The truth is that initial public offerings have been under pressure since regulatory burdens for public companies were ramped up following the dot.com bubble.
STOs -- the new IPO...?
The enormous liquidity available in the private markets has replaced public capital and financed many rounds of financing for private issuers -- primarily in the tech sector.
However, for small, traditional companies who lack any tech sizzle, security token offerings (STOs) may be hugely significant if ease of issuance, global institutional capital access, and regulatory compliance can all be optimized together.
A friction-free UX for issuers, investors, and regulators.
We review this in our latest report, The Compliance Layer.