It appears that the Security Token market is suffering even more than the initial coin offering (ICO) market is. This is due to the fact that although there have been loads of projects launched, no actual investment has really been made, leaving everyone in limbo on such projects.
Many start-ups tried to fob off their fundraising offers as equity securities when the SEC started fishing out unregulated ICOs. The smaller ICOs didn’t stand a chance and were soon squashed. The same problem applies to the freelance start-up deals. When the market is inactive, there are very few privileges for investors, they have high costs and little or no liquidity at all.
According to a Medium article written by Andy Singleton:
“The market for tokenized securities is lifeless. Nobody is buying these securities. A squad of zombie startups staggers on, announcing infrastructure and posting deals for sale, hiding the dismal truth behind happy faces. But nobody is buying”.
Singleton goes on to state that the secondary trading market – liquidity – is genetically deformed. Research has shown that there is a massive base of buyers for desirable securities. However, these securities show that they will not allow much trading at any point in the future.
“The world’s largest asset class by a huge margin is in real estate. However here is where the dilemma lies. Why would anyone buy shares in tokens in a private real estate deal when they can get better deals in high liquidity as well as private markets?”, Singleton adds.
The cryptocurrency market provides an inspiration and will succeed when there are new types of deals and business models which are flexible in the token format. Bitcoin is a perfect example of this because it was innovative in coordinating the efforts of a community.
It has been proven that the tokenized security market will make documentation more efficient than the current private market. It will also offer exchange, automated compliance and worldwide distribution. If blockchain technology enters fully the public markets, then we will see more money changing hands. These transactions are sorely needed.
The public markets are very slow and involve various complicated systems which interact with each other. It also takes very long to test and change all these systems. The older system makes changes slowly and cautiously. Changes here are complicated as they need to be integrated into the system where they are cut off by licenses and frowned upon by the country.
Changing old habits is hard and there are lots of new features that securities investors and issuers are looking forward to integrating into the older system. However, these will take decades to be fully introduced into the system.
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