STOs And ICOs Are Growing Less, But Growing Up

PwC Strategy& and Crypto Valley Association (CVA) recently published the 2019 ICO/STO report, which illustrates that the overall ICO and STO landscape is entering a new phase of maturity.

In the second half of 2018, the number and volume of ICOs and STOs decreased considerably for various reasons however, the amount raised increased, and the amount of successful ICOs/STOs doubled when compared to 2017. All of this leads to signs of increased quality and maturity in the industry.

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The below crypto industry executives have provided expert commentary on what the findings of the report mean for the industry.

Jordan Fried, Vice President of Business Development at Hedera Hashgraph, said:

"This report emphasizes the need for a governance model that guarantees fairness, security, and stability. Complying with regulation means we need a public network capable of managing digital ID, Know Your Customer Data, as well as Anti-Money Laundering data. Hedera provides the tools to bind policy to an enterprise-grade network that’s required to stay compliant in this regulatory environment. It doesn’t make sense to issue millions of dollars in security tokens until you have a network capable of the scale, security, and stability that a proper security token market requires."

Armin Schmid, CEO of Swiss Crypto Tokens, said:

"This report shows that even in the crypto winter, ICOs and future STOs are continuously maturing. Cryptocurrencies bring new opportunities into the financial sector by widening access to investments such as real estate, luxury goods, private equity, and beyond. One of the dominant trends highlighted in this report is the tokenization of traditional assets and commodities, including fiat currency, real estate, gold, and oil. Stablecoins will be an integral part of this growing tokenized economy. This report shows that the industry has shifted somewhat from ICOs to STOs, and in light of the new convergence of traditional and digital finance, the next stage in crypto evolution is likely to be the continued rise of tokenized assets and stablecoins."

Nick Cowan, Managing Director and Founder of the Gibraltar Stock Exchange (GSX) Group Limited said:

"The report highlights the increase in the tokenisation of assets, a vision that has inspired our efforts in building the Gibraltar Stock Exchange (GSX) Group. Just this week we added five stablecoins to the GBX-DAX (Digital Asset Exchange). Stablecoins are providing a comfortable entry point for institutional investors to explore the digital assets realm, with regulatory advances also helping to attract new cohorts of investors.

The report also illustrates the steadily evolving global regulatory landscape, developments that will advance the mainstream adoption of digital assets. Since Gibraltar became the first jurisdiction in the world to introduce a purpose built DLT regulatory framework, I have seen first hand the merits of principles based regulation in helping to foster a sustainable blockchain ecosystem."

Vaibhav Kadikar, CEO of CloseCross, said:

"Increasingly, what we are seeing in the market is that jurisdictions are beginning to interpret STOs akin to IPOs and applying the same level of regulatory vigour. Despite the benefits of fractional ownership and digitised tokens, if this increased scrutiny becomes standard, the flexibility and retail investor scenarios will not last. Cross border investors are another impediment to STOs gaining traction, where each jurisdiction applies a different prospectus criteria, increasing costs tremendously. In summary, if the ICOs lose their sheen because they don’t provide profit participation and if STOs face an uphill battle, we may not see any significant uptake of these two vehicles going forward."

Lone Fønss Schrøder, CEO of Concordium, the world’s first ID/KYC-ready business blockchain network, commented:

"STOs may be the way forward as alternatives to ICOs but they do not solve the issue of delivering a high-quality project to investors. Whether pitched as ICOs or STOs, new projects must deliver value creation for investors to get a return on investment.

Using STOs to tokenize existing assets adds a regulated framework to protect consumers but also bolsters liquidity, offers easy management of fractional ownership, and allows for faster settlement and immutable proof of ownership.

It is good news that the market seems to be moving towards regulation, and the emergence of STOs is a harbinger of this overall push. One would very much hope a renewed growth in STOs is predicated on projects and ideas of better quality than what we saw with many ICOs.

We believe blockchains will be required to deliver on-block KYC/AML capabilities –– a challenge for Bitcoin and Ethereum but which we see as an opportunity for Concordium and other new blockchains with integrated ID-verification.”




About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and three kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own 2.5 grams of Gold