Security Token news for Week Ending Friday 21 February 2020

Security Token news for Week ending 14 February 2020

Here is our pick of the 3 most important Security Tokens news stories during the week:

BitGo Acquires Harbor In Surprise Expansion Beyond Crypto Custody

Crypto custodian BitGo announced Tuesday the acquisition of Harbor, a security token platform. The move allows BitGo to expand its services from custody, becoming the first single entity in the USA digital securities-cryptocurrency space holding broker-dealer, transfer agent and qualified custodian licenses. The terms of the deal were not disclosed.

BitGo is a Silicon Valley-based digital asset trust company and security company, claiming transaction volume of $15 billion per month. Harbor is a highly-regarded security token platform in San Francisco, and a licensed broken-dealer and transfer agent. This acquisition by BitGo of Harbor dramatically demonstrates BitGo’s determination to expand its digital assets footprint by undertaking new services.  Both companies are backed by numerous Tier One venture and other funders. 

Openfinance Lists LDCC Token from Lottery.com

Openfinance, a trading marketplace for digital assets, announced the listing of Lottery.com‘s LDCC token.

Lottery.com is a Texas-based company that enables consumers to participate in state-sanctioned lottery games via their mobile phones. The LDCC token is available for all US investors, not only accredited investors. The company aims to expand its business to provide a security token platform for charities, sports franchises, and other organizations to conduct raffles, sweepstakes and other games of chance to gamify fundraising.

Switzerland’s Validity Labs Joins the International Token Standardization Association ITSA

This week, the Swiss-based blockchain educational and infrastructure platform, Validity Labs confirmed it joined the International Token Standardization Association (ITSA). The decision to join the ITSA comes at a crucial stage of the EU’s STO regulatory development. The move demonstrates a further push for a more robust framework to support the expanding security token sector.

Validity Labs is an activist education force in Europe, and one of the leading providers of blockchain-based decentralized applications.  The company offers end-to-end STO implementation services with the goal to bridge the line between technology and legal compliance within the sector. 

ITSA is a non-profit German law association that specializes in token taxonomy. Token taxonomy is the identification, classification, and analysis of blockchain-based tokens. ITSA is a leading voice for the promotion, development, and implementation of comprehensive security token market standards.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

 

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Bitcoin price surges. Is Coronavirus behind it?

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The Coronavirus is negatively already affecting several global industries and should the disruption continue, we could see the impact reach all the way to the end of 2020. One of them, electronics and tech are already feeling the impact of the coronavirus. With Bitcoin’s scheduled halving in May, Chinese miner manufacturers have seen a rise in demand for new equipment. The world’s largest manufacturers of mining equipment are based in China (Bitmain, Canaan, MicroBT, and InnoSilicon) and all of them face delays in production and delivery. The price of Bitcoin and cryptocurrencies have increased whenever investors start to panic. Should we consider the coronavirus outbreak a good thing for the cryptocurrency market?

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

In a tweet on Valentine’s Day, Balaji Srinivasan, the ex-Coinbase CTO, compared bitcoin’s price to the growth of coronavirus. Srinivasan thinks that bitcoin will reach $100,000 following in the footsteps of coronavirus:

The comparison might look far-fetched, but in followup tweet Srinivasan provides more information to defend his position, including links to Wikipedia pages of Excursion probabilities and Geometric Brownian Motions. The comparison probably doesn’t make a lot sense to those unfamiliar with the stochastic process, but Srinivasan tries to enlighten us about the similarities between the latest Bitcoin price surge and coronavirus outbreak.

China has the status as a crypto investment hub. China is one of the most important markets for the crypto industry, not only in terms of sales and adoption, but also in terms of the number of startups. The country is the birth-place of major crypto companies including Binance, TRON, Huobi and others.

Even though the Chinese government has banned the trading of cryptocurrencies, the country still leads Bitcoin mining, with an estimated 65 percent of the total hash rate. China also houses the most crypto exchanges in the Asia-Pacific region, which has 40 percent of the world’s top 50 exchanges.

As we approach the upcoming halving, crypto funds and exchanges have been on an arms race, ordering new and more powerful models as they expect the halving will increase the price of bitcoin.

While manufacturing delays in mining equipment has been good news for existing miners, some mining operations have been interrupted. At a mining farm located in a remote part of China, BTC.top had to stop operations. Even if some Chinese crypto mining facilities are shut down by authorities, it looks like is has little to no impact on the network’s hash rate. The network appears to be performing stronger than ever with hash rates continuing to rise.

Screen Shot 2020-02-16 at 23.42.26.pngChinese crypto investors are a considerable market force. Since the US-China trade war started in 2019 and now with the coronavirus outbreak and stock markets failing, bitcoin has seen massive investments, by nervous investors.

Usually when stocks go down, cryptocurrency prices go up. Bitcoin has risen 48% since the start of 2020, outperforming gold. This may be due in part to the coronavirus. The market cap for the entire crypto sector has gone from $190 billion to the $290 billion.

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With 69,191 people infected with the coronavirus and 1,668 fatalities in China, many basic medical supplies are scarce. The crypto industry was among the first to support the fight against the epidemic. Hyperchain launched Shanzong, a blockchain-based donation tracking application. The platform tracks donations, from money, masks and other medical materials given, the matching to areas of need and delivery. It was launched last Monday and has already recorded 500 donations. Binance Charity helped Chinese Corps to distribute over 70,000 masks in the infected areas.

Also, as the world is trying to tackle the spread and treatment of the coronavirus, blockchain is being used for insurance claims.  In an article by the South China Morning Post, Xiang Hu Bao, a Chinese online mutual aid platform, added the coronavirus to the illnesses that are eligible for a one-time payout of 100,000 yuan ($14,300).

The cryptocurrency space saw the birth of CoronaCoin (NCOV), published in a Reddit post. Now you can bet on the coronavirus pandemic, The more the virus spreads the more valuable the token becomes. According to the website, the total supply is based on the world’s population and the token will be burnt once every 48 hours, depending on the number of infected people and fatalities.  What a way to incentivize people… let’s spread the disease to gain. It should do the exact opposite and gain value as the disease stops spreading. All the money, not just a portion, should be donated for a vaccine and to buy masks and other medical supplies.

The Chinese doctor that alerted the world about the coronavirus, who died last week, has now been memorialized on the Ethereum blockchain. A smart contract on Ethereum with code formatted in the shape of a monument to Dr. Li Wenliang, was created last Friday.

Just like other global epidemics, coronavirus already has a serious impact on the global economy, especially because it’s happening in China, that second strongest economy in the world. In the past Chinese investors have relied on Bitcoin to hedge against the yuan’s devaluation. While that might be one big factor behind the positive trend on the bitcoin’s price, if the coronavirus continues to spread in China and other places, it will hurt the global economy, including bitcoin.

Something bad can never be good in the long run.

Balaji Srinivasan may be right when it comes to the math about bitcoin and it will reach $100,000, but as far as the coronavirus goes, let’s hope its trajectory is already peaking.

Glasgow Economic Forum (GEF) is taking place in the first week of March (7-8 March, 2020). It’s an annual conference organized entirely by students of the University of Glasgow. The event is packed with ideas, discussions and fascinating insights by world-renowned speakers. Support the students and their efforts. If you’re a company, make a donation or buy tickets. Find out how you can help them!

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Security Token news for Week ending 14 February 2020

Security Token news for Week ending 7 February 2020

Here is our pick of the 3 most important Security Tokens news stories during the week:

One. Ethereum-based FLYT is First Property-backed Security Token in Africa

On February 8th, 2020, Flyt Property Investment announced the launch of Africa’s first-ever security token backed by property. The firm partnered with technology provider Bakari to create FLYT security tokens which are equivalent to one share in the Flyt Hospitality Fund.

Curator’s Note: We take the security of property for granted in the West, but property title is a problem for billions in the Rest of the World. So the fact that this Security Token is from Africa is significant. 

Two. Small German Bank to Offer Tokenized Securities

Munich-based Bankhaus von der Heydt has partnered with blockchain financial services provider Bitbond to help integrate tokenization into its securitization platform.  The partnership will allow the bank to tokenize digital securities onto the Stellar blockchain, which it can offer to institutional clients via private placements.

Curator’s Note: Deployment is expected in April. The Bank plans to offer customers a custody solution for tokenized equity developed by Bitbond and the Bank in 2019. The solution received approval from the German financial regulator.  Bitbond received German regulatory approval for its tokenized bond in January 2019, launching Germany’s first regulated security token offering later that year.

Three. Swiss Company OverFuture Gets Green Light for a Blockchain IPO

In what’s being called a first for Switzerland, OverFuture has been allowed to incorporate for an initial public offering (IPO) of tokenized shares on the blockchain.

Curator’s Note: The firm’s IPO prospectus indicates an offering of 8,399,000 “common equity share security tokens on the Ethereum blockchain, with smart contracts provided by EURO DAXX, a digital assets exchange based in the country’s “Crypto Valley” city of Zug.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

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The Digital Wallets of the Future: Money and Identity

crypto-currency_hand-holding-phone-iwth-bitcoin_digital-wallet_bitcoin_blockchain-100793898-large.jpgCryptocurrency wallets have been closely linked to other transactional services. A digital wallet refers to an electronic device or online service that allows someone to make electronic transactions. Usually they are bundled with other services, like exchanges (Coinbase, Binance), physical devices (Trezor, Ledger), or other services (Casa). What if cryptocurrency wallets weren’t just about storing digital assets, but were about identity, serving as a single passport to both the physical and digital world?

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

In the cryptocurrency world, wallets act as a gateway to access a service. A crypto wallet, unlike a physical wallet, a custodial or exchange wallet, or bank account, doesn’t control currency. It moves money between two parties, similar to services like Paypal.

 

Cryptocurrency wallets let people connect to services to buy and sell cryptocurrencies. They also act a way to store the user’s cryptographic private key, needed to perform these transactions. In essence, your cryptocurrency wallet holds the private keys to your assets sitting on a blockchain and lets you transact by “signing” orders.

Crypto wallets have become very popular in recent years. Over 36 million crypto wallets have been created since 2012.

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Also a study from Juniper Research found that the number of people using digital wallets will increase from 2.3 billion to nearly 4 billion, or 50% of the world’s population, by 2024. This in turn will push wallet transaction values up by more than 80% to more than $9 trillion per annum.

Usually, when users signup to use a cryptocurrency wallet, they validate their identities, before being able to transact. If you live in the US, you were most likely asked to provide your social security number and license or equivalent if you’re outside the US. Depending on other factors, the cryptocurrency wallet provider may have also ask for more information in alignment with KYC regulation.

The world’s economy is built by institutions that collect our data, such as banks, telecoms, insurance companies, brokers, drug companies, governments, online services and others. Every year, hackers steal billions of dollars worth of data. Our data, not just the data we give voluntarily but also data collected as we interact with the services we use, is harvested and processed by few huge centralized companies and organizations. Our data is trapped inside accounts on services and apps. Companies like Google, Facebook, Amazon Microsoft,, LinkedIn, Experian, and Visa, all exist collect and monetize our data.

The need to decentralized our data is an absolute necessity. As we move from accounts to wallets, we will be able to manage our data, just like we manage Bitcoin, Ethereum and other digital assets, being able to switch between vendors easily and freely.

Wallets will evolve beyond the simple function of buying and selling digital assets. Our wallets will become our primary identity authentication platform, that will contain everything we carry in our physical wallets and more.

A wallet in the physical world contains multiple pieces of your identity. Imagine your passport, drivers license, medical card, and other types of IDs being replaced by a single digital wallet on your phone. A driver’s license can is used to prove your ability to drive, to buy alcoholic drinks or accessing identity-specific services like opening a new bank account. Most of us have debit cards that allow us to access funds from our bank accounts and use them wherever we want to buy things, with our pin that validates our identity to merchants. Our wallets will be able to store everything related to our identities along with cryptocurrencies and tokenized assets (stocks, bonds, etc).

Since crypto wallets already validate our identity, they could act as a third party references of our identity for others. One of the biggest pain points is that every we sign up for a service we need to verify our identities, uploading passports or other documents. It’s not far-fetched to think that companies might be willing to accept a trusted wallet verification, instead of conducting their own independent checks.

The internet was not built to transfer value. It was built to transfer information which didn’t need as much security, as value does. Today, blockchain technology allows us to store and keep our data and assets in our own secure wallets, with absolute control over how and when they’re used. Being in full control of your own identity and assets in a decentralized way makes a lot of sense.

The future wallet will be an interface to protocols and services, and will represent our professional financial status, and personal identity. Wallets will change from something we use sometimes, when we want to buy and sell things, to something we use all the time. Our digital wallets will become the single most important place, where we store everything, from our money, to our identity.

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Security Token news for Week ending 7 February 2020

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This week I interviewed an expert on the  Security Token market, Sheldon Freedman a Fintech and funds lawyer at Hassans in Gibraltar.  Sheldon picked our 3 Security Token stories this week. Security Tokens is a big, complex subject that requires legal, technical and commercial  knowledge and we found that rare combination in Sheldon Freedman.

One. Sony Financial Ventures makes strategic investment in security token issuance platform Securitize

Securitize, located in San Francisco, is a U.S. Securities and Exchange Commission-regulated transfer agent. The firm aims to modernize the traditional capital markets by allowing institutions to issue and manage tokenized assets such as equities, fund stakes, fixed income, and real estate.

This strategic investment by Sony demonstrates a maturing of the Japanese security token market and an endorsement of Securitize and its underlying technology. Securitize is a respected global compliance platform for issuing and managing digital securities on the blockchain, including dividends, distributions, and share buy-backs. Securitize partners with exchanges, broker-dealers, custodians of crypto and other financial infrastructure for digital securities.

Two. MSGLD Security Token: Tokenized Gold

The tokenization of precious metals continues to be an area of expansion within the security token sector. This week, UK’s MetalStream joined in on the action with the launch of the MSGLD security token. The news symbolizes a strong desire to bring the advantages of tokenization into the global mining arena.

Tokenized gold is easily “stored” and traded. Each MSGLD token lives on the Ethereum blockchain, is backed by and redeemable for certified gold bullion at a discount to the current spot price. MetalStream aims to transform financing for junior miners through its metal stream contracts and the tokenisation of gold to be delivered under these contracts. MetalStream has partnered with publicly-traded Canadian mining firms, Canamex Gold Corp. and Guyana Goldstrike Inc.

Three. Singapore Continues Its Fintech Love Story:  iSTOX Is Now Fully Licensed

The Monetary Authority of Singapore announced that iSTOX, the popular capital markets platform, had transitioned from the body’s FinTech Regulatory Sandbox into a fully licensed company.

This is a significant development as Singapore continues to build a domestic Fintech economy. High hopes have been pinned on iSTOX, which has received the backing of several Asian institutional investors. iSTOX functions on blockchain technology, offering custody support and trading of digitized securities, as well as equity-raising via equity-linked products.


We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

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Cryptocurrency religions: Will altcoins survive?

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Bitcoin was the first and every other cryptocurrency came from it. Will Bitcoin survive? Will altcoins survive? This has been a heated debate with one side predicting the demise of the other. Bitcoin maximalists claim that we are heading to Bitcoin dominance and that altcoins are dying, urging the people to sell their positions in other crypto assets to put it all in Bitcoin. In a tweet last year, Charlie Lee wrote: “Some self-proclaimed Bitcoin Maximalists, are actually Bitcoin Extremists. They think all other coins are scams and will go to zero. Maximalists think Bitcoin is and will remain the dominant cryptocurrency, but there is room for altcoins to exist and even do well. What are you?”

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

Bitcoin and other cryptocurrencies have become a belief system. Faith in the value and power of cryptocurrencies is good. But just like different religions, every cryptocurrency is on its own path to the truth.

On January 2019, Roger Ver, posted:

Like Orthodoxy in some religions, people tend to become extreme and intolerant to any other faith and deviation from the original.

In the cryptocurrency world, these people are called “maximalists”. A maximalist is a person that has extreme views and is not prepared to compromise. In his tweet Ver, a Bitcoin Cash evangelist, posted a picture of two identical sides, where “ours” has only good attributes, and “theirs” is shit.

Bitcoin’s dominance is unquestionable, its market cap is 8 times bigger from Ethereum, the second cryptocurrency. Yet, there’s not one truth in the path to enlightenment.

The fact is that as blockchain and cryptocurrency technology develops, we’re going to see many alternatives. As different cryptocurrencies make technology choices and trade-offs, trying to solve problems, we will see different coins occupy different niche markets. Even at the top it’s it’s going to be crowded, with at least two or three competitors in every application you can imagine.

We’re not going to end up with one system that does everything. That doesn’t make sense with this technology.

When you look at the evolution of cryptocurrencies, initially we had one, Bitcoin. Since we’ve seen the appearance of hundreds of coins, now thousands and in the future we will even see tens of thousands. The growth of new blockchains and tokens, doesn’t seem to be slowing down. In the last decade a thousand coins died, while close to 3,000 are still in existence.

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Number of cryptocurrencies

You can expect to see more failures and initiatives come and go, just like we saw in the 90s dotcom market.  But this is great from a technology perspective, because it only contributes to the evolution of the industry. Keep in mind that just because there are many alternatives, it doesn’t mean that every coin listed on Coinmarketcap.com is worth looking at or even buying.

In the crypto market there are no barriers that would stop someone from building something different or allow someone to build a monopoly. That’s one of the great aspects of this market, its openness. The competition to create the best cryptocurrency has sparked an evolution that led to forks, birthing new cryptocurrencies such as Bitcoin Cash, Bitcoin SV and Bitcoin Gold, to name a few.

The idea that an environment of multiple competing cryptocurrencies is undesirable, is just wrong. While Bitcoin has clearly outperformed most cryptocurrencies, to expect that this will always be the case strikes me as stupid.

Cryptocurrencies keep on increasing because of our desire for constant improvement. Having several thousand cryptocurrencies isn’t a bad thing. Each represents a solution to a different problem.

While many are still ahead of their time, as technologies and communities mature, they will begin to disrupt industries like never before. IOTA, which uses a blockchain-like variation, is working to connect IoT devices. Using this network, your car will be able to interact with sensors and devices all around the city you live in. The “Ethereum Virtual Machine” (EVM) is capable of running smart contracts that represent financial agreements, employment contracts, and act as trusted escrow for the purchase of high value items.

Even if some coins don’t stand the test of time, they will surely influence the direction of cryptocurrencies to come. We love some and hate others. Freedom offers choices and this is what cryptocurrency is all about.

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Thin Applications, Smart Wallets, and Defi

The Defi world is booming (on a relative scale) with an over 40% increase in the amount locked (in USD) in the month of January. The introduction of multi-collateral DAI (MCD) in late Fall last year, has clearly made a difference.

Admittedly, the amounts involved are still very small; shyly approaching the $1billion mark in a cryptocurrency market with a total market capitalization of $260billion.

My post today is inspired by Joel Monegro`s excellent review of the nearly 5yr old `Fat protocol` concept. Keep in mind that at the time Ethereum wasn’t around yet. In `Thin Applications` he looks to make sense of Web3, a work in progress with the dazzling choice of blockchains to choose from.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

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What is a Thin Application?

 Well, let`s look at an example that we are all familiar with, that is NOT a Thin Application. Coinbase, the popular crypto application, is nothing more and nothing less than a traditional business model. It charges exchange fees for custodying your cryptocurrencies and for offering an onramp and an offramp to fiat money and the traditional banking system. Coinbase, is actually in a business that has high barriers to entry as it is expensive to get the licensing required, to be compliant in all jurisdictions and to maintain security. Coinbase, is also a business that can enjoy economies of scale in the conventional way, much like GAFAs do. Their clients are captive of the Coinbase interface which is not interopable with the rest of the world. Client data also resides on the Coinbase interface.

A Thin Application is native to Web3 which means Non-custodial & sovereignty of personal data. Current live examples of Thin Applications are ventures that offer microservices on open-source protocols. They don’t require lots of capital to go live, because the main costs are carried at the protocol layer. For that reason they can launch before even getting Seed capital. As Ivan on Tech said in a recent broadcast, `this is the time to build applications`.

Of course, Thin Applications cannot charge fees like Coinbase. This is exactly where we will see a genuine business model innovation.

Joel Monegro mentions three Thin Application examples, Zerion, InstaDapp, and Multis. Placeholder has recently invested in Zerion which is a friendly app to manage Defi assets. It is not centralized like Coinbase and therefore, cant charge fees for the bridges it has built so that its customers move from one Defi protocol to another (MakerDAO, Compound, Uniswap, Set).

InstaDapp launched first a Smart Wallet for Defi assets and later also a dashboard (a la Zerion) with interop ability between MakerDAO and Compound (Uniswap coming soon).

Smart Wallets are another Defi innovation that will be competing with hardware wallets more and more. They not only give control of the private key management to a smart contract but they also aim to offer a wallet recovery procedure. I am a beta tester for the Pillar Smart wallet which combined with Pillar layer 2 solution (PPN) that uses the Pillar as a meta-token, can become a leader in crypto adoption. Pillar announced during their General meeting last week, several important ecosystem partnerships – Abridged.io and Connext are two mains ones (you can watch the entire GMA here).

Thin Applications clearly rely on the growth and value creation of their protocols that they operate on – e.g. MakerDAO, Compound, Uniswap, etc. The open question remains what will be the business model for these Thin Applications?

Assuming they grow their user base, will they choose to launch an in-app token to reward their users while still maintaining their non-custodial & sovereign principals?

Will they become a `money lego` to a decentralized core banking system?

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Security Token news for Week ending 31 January 2020

utility security tokens.001

Here is our pick of the 3 most important Security Token news stories during the week:

One. Vertalo Chooses Tezos for Security Token.

The Austin, Texas-based transfer agent, Vertalo shocked investors after announcing it would transfer its tokens over to the Tezos blockchain. The decision to convert tokens over to the Tezos blockchain comes after Vertalo executives examined the benefits of such a transfer carefully  after it announced that its VToken smart contract securities would be produced on the Tezos blockchain, by default, for all new issuers.

Transfer Agent is one of those niche jobs that are a relic of legacy finance. So interesting to see them move into Security Tokens. Plus, it is interesting to see them move from Ethereum to Tezos.

Two. Swiss company Overfuture To Offer Tokenised Equity Crowdfunding (Security Token Offering).

Swiss company Overfuture has been approved to list the first articles of incorporation hosted on the blockchain in Switzerland. Overture will list class A shares hosted on blockchain as they tokenize their Initial Product Offering (ICO), and furthermore, onto secondary trading of the digital asset.

NYLON dominated Legacy Finance but Switzerlend maybe the place for Blockchain Finance. It is a crypto friendly jurisdiction with an open economy and great technology education. 

Three. Israel Promotes Development of Security Token Sector.

This week, Israeli officials raised eyebrows across the entire blockchain sector after the Israel Securities Authority (ISA) announced that the country would actively pursue the development of a security token trading platform. The decision to actively facilitate security token trading in its jurisdiction is far cry from the country’s neighbors, many of whom, banned crypto trading over the last year.

In Legacy Finance, ventures had to cluster in a few overcrowded expensive cities where the money was. In Blockchain Finance that becomes decentralized so you can build it in Tel Aviv and stay there. 

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

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From ICOs to STOs and IEOs. What is next in the evolution of crypto fundraising?

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Funding is a prerequisite for any new crypto project or startup. At the dawn of the new decade, we’ve seen a decline in token sales as source of funding. Where is the capital for crypto projects going to come from? Will traditional investment vehicles, like venture capital become more significant or will we see another evolution in crypto fundraising?

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

In 2017, ICOs were the most popular cryptocurrency trend. During that year 875 projects sold $6 billion worth of their tokens. In 2018, 1253 ICOs raised $7.8 billion, but 2019 was a completely different story. In 2019, we saw the introduction of the IEO. In total, token generation events during 2019 raised $3.2 billion (ICOs raised less than $370 million). But very few IEOs last year were able to raise a decent amount capital and only on selected exchanges. The drop can all be attributed to lack of regulatory oversight, a large number of exit scams, failed projects and delayed developments, severely damaging investor sentiment around token sales.

While the price of Bitcoin bounced back after the first quarter of 2019, the fate for most of the other coins, like Ethereum, EOS and Tron, was not the same.

The introduction of IEOs provided an extra layer of trust and security, when compared to ICOs. An IEO is very similar to an ICO. Investors receive tokens at a discounted price, in exchange for investment. IEOs are conducted on cryptocurrency exchanges, that claim to perform strict due diligence checks, to filter out any bad actors and protect their users. At a first glance IEO figures are impressive. The launch of BitTorrent on Binance in January ended in 15 minutes with over $17 million worth of tokens sold. But only a small number of IEOs have been able to get this kind of activity.

IEOs have their own share of problems and many are still skeptical. For the most part, IEOs were more secure than the conventional ICOs. While the IEO experiment showed that ICOs can be rebranded, it also showed that some of the inherent flaws couldn’t be evaded. As smaller exchanges, with more lax requirements, launched their own IEO launchpads, once again fraudulent token sales appeared

With declining ICOs and IEOs, blockchain startups are looking for other ways to raise money.

Even when ICOs were red hot, there was venture capital investment in crypto companies. Companies like Coinbase and Circle raised money from VCs. In 2018, VCs invested around $3 billion in crypto and blockchain-related startups, around 40% of what was raised by ICOs. In 2019, venture capital investment took a step back. By the middle of 2019, VC funding in cryptocurrency startups accounted for USD 822 million.

Security Token Offerings (STOs) have emerged as an alternative. While launching an STO is a complicated process, in 2019 they gained more traction and capital, with 64 STOs, collectively raising almost $1 billion. STOs were born out of the need to raise money in a more regulated way, while keeping the flexibility that tokenized assets offer. Only a few platforms are licensed to host STOs, but a huge surge in interest has led many to seek licenses. Because of this, 2020 will likely bring a new wave of STOs, though these will mostly only be offered to accredited investors, while a regulatory framework evolves.

We are also seeing another trend, the Initial DEX offering (IDO). Very similar to IEOs, IDOs are conducted on decentralized exchanges, instead of centralized exchanges used IEOs. Last year, Raven Protocol (RAVEN) conducted an IDO on Binance’s DEX. But for now decentralized exchanges still need to mature in terms of users and volume. For example, Binance’s DEX has a daily trading volume that is under $2 million.

When ICOs first came out, I thought they were revolutionary. The IEO model fixed some of the flaws that plagued ICOs and gave developers an effective and faster way to get to market. Even though IEOs started early last year with some fireworks, they did not completely resolve the trust issues, so the investor enthusiasm quickly fizzled out.

To make investors feel comfortable again, we need more than ease and accessibility, that ICOs and IEOs offer. We also need to offer IPO-grade regulation and compliance. But most startups are not able to do that. So what’s the middle ground? Well, maybe the solution is STOs, tokenized securities that comply with regulations. But for now STOs are still a hard route, that lacks liquidity and regulatory clarity.

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Bitcoin Bears vs Bulls

Bulls-vs.-Bears-1000x589.jpgBitcoin started the year with a bang. In the last 24 hours it went up 3%, topping $9,000. The entire week has been exciting week, with one rally after another feeding the bulls. Bitcoin has exploded by over 30% since January 1, and we’re just a couple of weeks into 2020. What a difference from what happened in January 2018. Market watchers are pointing to Bitcoin’s halving as the catalyst for the next big price push. 

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

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There are two major forces we need to consider. On one end we have the Chinese New Year, which has always been bad for cryptocurrencies. On the other, political uncertainty is providing a fertile ground for the value of cryptocurrencies. Both these forces are pulling crypto from opposite ends and will cause major price swings in the moths to come.

For some reason Chinese New Year has always been bad news for Bitcoin. This year, just like the last four years, you can expect, a little dip right before the Chinese New Year. In January 2019, Bitcoin dipped to around $3,300. In 2018, the Chinese New Year, kicked off the bear market, with a huge slide from around $16,000 to $5,000. In 2017 we had a mini dip, dropping from $1,200 to $700. Some people attribute the price drops to the Chinese cashing out and giving gifts to family and friends. Personally, think a lot of market makers take time off, and as a result potential orders don’t get filled, which causes the entire market to drop.

On the other end of the spectrum, Bitcoin’s decentralized governance combined with the global uncertainty, because of the relations between the United States and Iran, Trump impeachment and the US and China trade war are pushing people towards crypto and driving prices up. People are trying to find ways to maintain the value of their assets, avoid potential confiscation and limit effects of the possibility of the US government printing money to fund a war.

On May 13th the halving will be important, because it will directly impact the amount of Bitcoin produced per day. Today, 12.5 coins are created every 10 minutes, with a total of 1,800 Bitcoins per day and a value of around $14 million. That number will drop to 6.25 and along with that, inflation will drop. Even though halving event is not a secret, it’s part of Bitcoin’s predictable monetary policy, most of the the general public does not know exactly what the halving means, and this will create most likely create FOMO.

But beyond halving, Bitcoin’s upgrade later this year the could be another important driving force. The soft fork, which will most likely happen int the last quarter fo the year is expected to improve Bitcoin’s privacy and scalability. Schnorr signatures, Taproot schemes and Tapscript language, will bring smart contracts to Bitcoin, eliminate penalties in terms of fees for multisig wallets and improve security with Taproot.

Crypto assets, are here to stay and prices will rise. Governments, central banks and big tech is coming in. Look at China’s central bank, Libra and JP Morgan for example. But thinking that Bitcoin and crypto will go ballistic because of the halving or something else, is just wishful thinking. Volatility is the name of the game, so expect a lot of crazy swings, as bulls and bears duke it out.

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