As Originally Published on thetokenist.io
The potential for security tokens cannot be understated. If successful, we are looking at $24T of value coming to the industry in the next decade.
The security token industry is just getting started, but expectations are high for its success. The boom in 2017 taught the space many things, mainly that ICOs are out. They’re too risky and oftentimes brought scams to the space. However, STOs promise something different: a decentralized, crowdfunding model which is transparent, compliant, and safe.
According to a report released by Fabric Ventures, around 58% of all ICOs in 2018 either failed, disappeared, or refunded its investors. Yet, with the ICO decline, STOs have come in to fill the voice.
Fundamentally different from a utility token, a security token is linked to real-world assets and/or funds. It pays dividends or interests to the token holder based on the value of the underlying asset. The underlying asset can be shares, bonds, real estate, or even art collections.
What will make traditional investors happy about STOs is that they require KYC and AML features, built-in. Compliance is mandatory.
“$24T in Security Tokens by 2027”
According to recent metrics, the security token industry has an outlook of bringing in some $24T into this new sector. Based on the Dot Com bubble, this expectation is anticipated to be reached by 2027.
Unfortunately, in the United States, STOs are still viewed as a legal grey area. The SEC as not set out a clear precedent with most issuers pending approvals. The SEC has recently issued a framework for token securities, however. There are fears the world’s largest economy could fall behind if this uncertainty continues.
In Asia, Singapore and Taiwan show signs of becoming the leaders in regulation on this new sector. Both are mulling over new regulations, and have taken a ‘sandbox’ approach to see which methods work best.
In the long term, it seems that the digitization of real-world assets seems inevitable. By all estimates, the STO sector is just getting started.