3 corner fight between Security Tokens, NASDAQ/NYSE and Regional Exchanges

“Going public” used to mean only one venue decision  – NASDAQ or NYSE? Everything else was denigrated as a “regional exchange”. In the past that tended to mean a lower valuation, as you were restricted to only local investors. Or you needed sophisticated investors using tools that could normalise valuations into a single reference currency. That […]

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Are Security Tokens emerging from coma as INX IPO debuts?

TLDR. Well it depends, said the consultant punching the clock. Will Security Tokens enable scammy operators to separate dumb money from their money? Or will Security Tokens power a new wave of innovation to make the world a better place (perhaps via “digital cooperatives”). First, the news, well reported in many venues, that INX Limited […]

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If Security Tokens are in a coma, maybe it is time for a new look at Utility Tokens – did somebody say ICO?!

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Before we had STO, we had ICO. Now the STO market is either taking a refreshing nap or in a coma – or punched by the SEC and down for a count of 10.

Before either ICO or STO became famous, somebody pointed out to me that  tokenizing existing assets via what we now call Security Tokens is a big and important change but not as fundamentally game-changing as a totally new tool such as Utility Tokens. Maybe that idea of Utility Tokens is worth revisiting?

This where it pays to understand what happened with Telegram and the SEC. The scale of the Telegram offering (via a SAFT = Simple Agreement for Future Token) had the Utility Token bulls of that era (now very quiet) crowing about how it meant smart big money was flowing in. There was no question that the money was big and no question that the investors were accredited. My take was/is that big and accredited does not always make it smart money.

Anyway, the SEC and the courts have decided on Telegram, even if it will be debated and discussed for years.  You can see why the SEC decided as they did and why they took their time. Telegram is a big and reputable company and lots of money was at stake, not just the initial large amount raised by Telegram. The Telegram GRAM token would have probably generated billions of dollars of trading in GRAMs on secondary and derivative markets. 

STO arose in response to the broken ICO market (which was a response to the broken VC to IPO market). There are two problems with ICO:

  1. Branding. For too many investors ICO means at best a bad deal (at worst it means scam).
  2. The C in ICO means Coin or Currency. If there is one area that regulators look at even harder than a Security it is a new Currency.

Utilities on the other hand are boring and legal. They are really a tool of marketing to reduce the cost of Customer Acquisition as we explored in this chapter of the Blockchain Economy. The SEC has gone on record to say that at least some Utility Tokens are legal. If customers are willing to pre order and pay upfront and if that helps the company raise enough money to deliver as promised that is both legal and good for business. The CEO discusses Utility Tokens with the CMO, maybe with the CFO, and leaves IR (Investor Relations) out of the loop. All investors want to know is how efficient the company’s marketing is.

There are two theories for how this will play out – regulated and unregulated:

  • Regulated.  The markets and infrastructure for the exchange of security tokens mature and we attach lots of things such as revenue share/royalties, or the rights to listen to music, read a report or watch a video. In other words a Security Token may include what we call a Utility Token today.
  • Unregulated. Tokens for what the SEC classes as not a security are bought and sold in the same way we buy and sell other digital assets such as music, writing, video etc.

Yes, it is time for a new look at Utility Tokens, but we should never say ICO again or any three letters starting with I and ending with O that sounds like IPO.

Image sources; Coma & Nap & Boxer

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.

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If Security Tokens are taking a nap, buy $OSTK now

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In our last post on Security Tokens we asked if Security Tokens are taking a refreshing nap or in a coma at death’s door?

If you believe that Security Tokens are taking a refreshing nap, you have a simple way to profit from that belief – you buy the stock of a publicly traded company called Overstock (symbol = OSTK) that owns tZero which could disrupt Wall Street.

You don’t need anybody’s permission, there are no gatekeepers (such as a VC fund) to go through; you simply use any low cost online broker. Nor do you need a lot of money. If all you can afford to invest is $100, that is OK.

All you need is insight, courage and a bit of luck aka the standard rules of investing.

In this post we look at 5 strikes for $OSTK and 6 strikes against $OSTK.

5 strikes for $OSTK

  • Patrick Byrne is rich, smart, deeply knowledgeable and passionate. What else do you need in an entrepreneur?
  • OSTK is a Public Company that can eat its own dog food. Byrne has establishment clout and credentials as CEO of a public company.
  • They have assembled all the right pieces in their T Zero platform.
  • Wall Street is a classic huge broken market. If Byrne pulls it off, the upside is massive.
  • The pandemic is accelerating the pace of digital disruption. This is the time for big wild swings of change.

6 strikes against $OSTK

  • Patrick Byrne is eccentric and fights the establishment. He is notorious for fire-breathing passionate (and well reasoned/articulated) rants against the Wall Street establishment.
  • Being too early is indistinguishable from being wrong. We have been writing hopefully about Zero for many years – for example see this from January 2017. For public market investors that is a long, long time to be patient.
  • The incumbents will fight hard against disruption to their cash cows and have the power to fight hard. Wall Street power should never be underestimated.
  • Too many moving parts. T Zero is a complex 12 cylinder racing engine and is part of Medici which has other cool Blockchain ventures which is part of a small low end e-commerce venture battling Amazon and Walmart.

6 is more than 5 but OSTK could still be a big winner. Even if Security Tokens are in a coma, they may recover and then OSTK could be a great bet.

What do you think? Will $OSTK win against the Wall Street establishment? Would you bet on David or Goliath in this story?

Coma Image & Nap Image

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.

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Security Tokens: don’t fight the regulator if you want to be regulated

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The idea of Security Tokens was to combine all the efficiency and low cost of ICOs with legal and regulated offerings. The reality is that not much is really happening currently  in  Security Tokens – as our News Quality Assessment (NQA) data shows.
We have been tracking the Security Token space since before it had an official name while the unregulated ICO wave was still cresting. Recently we created a unique way of tracking the news in this and other spaces – our News Quality Assessment (NQA) methodology. This gives us good data on which sectors are getting traction and which are not.
NQA tells us that not much is happening in Security Tokens today. Are Security Tokens taking a refreshing nap or in a coma at death’s door? All we know is that it is quiet out there.
Here is our analysis of why Security Tokens are in quiet mode. If your strategy is to offer a  regulated service you cannot fight the regulator. If you don’t fight the regulator, be prepared for a long hard, expensive slog to keep them happy with lots of resistance from incumbents and lots of bills from lawyers and other advisers.
In contrast, Bitcoin is totally unregulated and permissionless.  Bitcoin cannot be killed by regulation because Bitcoin is not asking for permission to operate.
If Security Tokens are in a coma it is tempting to blame the pandemic. The sort of people who like a regulated service tend to be risk averse and the coroncrash in prices of traditional securities has given those risk averse folks more assets to buy at reasonable prices.
What do you think? Are Security Tokens taking a refreshing nap or in a coma at death’s door?
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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.

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Security Tokens: Real Estate, tough competition, partnerships

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Sheldon Freedman is on holiday this week.

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

1. Tokenized Real Estate Booms While Security Tokens Struggle

Despite a nearly double-digit retraction in the combined capitalization of the security token sector, real estate tokens gain over 4% during April .

Why It Matters: Security Tokens suffered in April, down 38%. Real Estate tokens are the only bright spot. The pandemic hurt all markets in April, so any sector gaining has to have something interesting.  Buying a home is the biggest financial commitment of most people’s lifetime. Buying property commercially has historically only been for the wealthy. Tokenization may change that calculation as it makes fractional ownership so easy. 

2. Crypto Bank Partnership Intensifies Digital Asset Competition

SEBA Bank AG, a new Switzerland based crypto bank has announced a partnership with Tokensoft, a U.S. based provider of digital asset issuance and management technology. SEBA Bank will use Tokensoft’s technology to enable clients to design, structure, issue and manage digital assets on SEBA’s platform.

Why It Matters: Crypto Banks are working hard to differentiate between themselves and legacy banks. It is all about the costs. Expect more partnership deals as regulated Crypto Banks look to shave basis points off costs by partnering with tech companies down the stack.

3. ICON Foundation And LCX Partner to Innovate On Security Token Infrastructure

VADUZ, Liechtenstein, and Seoul, South Korea – Liechtenstein Blockchain Innovator LCX declare another association with ICON Foundation. ICON Foundation and LCX have signed a memorandum of understanding and concurred on a long term partnership.

Why It Matters: More partnership between regulated Crypto Banks and tech companies down the stack. Cross border is no hurdle – this is Korea meets Lichtenstein. When markets are quiet (as most were in April), entrepreneurs focus on building out product capability.

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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.

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The Week in Security Tokens Ending 8 May 2020

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The mention of Switzerland conjures up fine watches, exquisite chocolate, and stodgy banking. This week in Security Tokens sees Switzerland sprucing aggressively in the banking tradition – launching a world-class STO platform for Europe and funding an ambitious digital artworks platform, in part, with a security token sale. Here is our pick of the 3 most important Security Tokens news stories during the week:

TokenSoft Expands Security Token Services to Europe

TokenSoft is bringing its security token issuance platform to Europe through a Switzerland-based counterpart, TokenSoft International AG. The regulated STO platform announced Wednesday that it struck a licensing deal with its eponymous European partner, who now has exclusive continental distribution rights for TokenSoft’s tokenization software.

Why It Matters:

The American Tokensoft (Tokensoft Inc.) does not have ownership interest of any kind in the Swiss licensee partner Tokensoft, which was formed earlier this year in Zug. Tokensoft Inc.’s move into Switzerland reflects STO bullishness on the part of both parties. TokenSoft retooled its platform to conform to Swiss regulations and the European Union’s GDPR.

Ethereum-Based Digital Art Platform ArtID Launches Security Token Offering

Ethereum-powered digital art platform ArtID launched a security token offering to fund the further development of its marketplace. ArtID is seeking five million euros in the offering and reached the soft cap set at 580,000 euros within one week.

Why It Matters:

This news demonstrates how blockchain integration is playing a key role in structuring digital finance and digital products.  Lugano, Switzerland-based ArtID is a unique, active digital artwork platform with over 1,000 artworks currently available for purchase.  Each artwork is blockchain-verified as original and unique. To date, ArtID has supported the purchase of 6,000 artistic and limited edition photographs.

The platform’s advisor for the STO is global corporate finance firm Kreston RS. Luxembourg-based tokenized investment platform STOKR is hosting the offering. 

Wall St Veteran Launches Crypto-Powered Social Network and Marketplace

CoinLinked, a social media network and marketplace platform founded by Wall Street veteran Jenny Q. Ta, launched on May 7.  The platform will feature a utility token that rewards users for activity on the platform, and can also be redeemed for discounts on CoinLinked’s marketplace.  CoinLinked has designed two native tokens — a security token for speculators seeking to invest in the platform, and an ERC-20 utility that will serve multiple functions on the CoinLinked platform called CoinLinked Coin or CLC.

CoinLinked users will be rewarded CLC in exchange for producing content on the platform, including uploading pictures or videos, sharing links, or engaging with existing posts.  Speaking to Cointelegraph, Ta described CoinLinked as the “first-ever blockchain-based social network and crypto-commerce platform,” likening it to a hybrid decentralized/centralized amalgamation of Twitter, Instagram and Amazon.

Why is Matters:

The embrace of crypto by a a successful serial finance entrepreneur like Jenny Q. Ta is a validation for the marketplace.  Her targeting e-commerce together with social media is an ambitious effort.  Coinlinked vows to never sell private user data, or to censor content that is legally permissible.  CoinLinked says its security token will soon be tradeable on regular security token exchanges like OpenFinance.

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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Security Token News for Week Ending 30 April 2020

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

STOKR Partners with Lemon Way Enabling Payment Gateway for Euro Security Token Issuance

STOKR S.A. has partnered with payment platform Lemon Way S.A.S as payment solution provider. STOKR is now subject to the supervision of France’s ACPR as well as Luxembourg financial regulator Commission de Surveillance du Secteur Financier (CSSF).  STOKR will now be able to perform Euro payments on its investment platform, enabling a full end-to-end Euro payment gateway for security tokens. Every issuer who is issuing digital securities on STOKR will now receive a Lemon Way merchant account, allowing him to raise Euro investments using SEPA direct debit, SEPA transfer, credit cards, and debit cards.

Why It Matters:

Last week, we reported how STOKR (Luxembourg) is managing an STO for Shanghai video gaming company, Pixelmatic. This partnership with Lemon Way (France) is another step in the integration of European infrastructure, providing muscle to STOKR, a digital marketplace/investment bank built on blockchain providing access to early-stage and growth-stage opportunities as digital securities.

Lemon Way is a major European payment institution providing online marketplaces and alternative finance platforms with payment processing, wallet management, and third-party payment in a KYC/AML. Its payment solution is used by more than 1,400 marketplaces in Europe including 200 crowdfunding platforms.

OpenFinance Network, to De-List Assets Unless Issuers Step-Up

No one is trading tokenized securities on OpenFinance Network (OFN); Well, not nearly enough to cover the cost of hosting such assets.  As a result of this limited activity, OFN has found itself between a rock and a hard place. With OFN garnering funds for operational costs through trading fees, it shouldn’t be surprising to hear that it needs a new approach.  This new approach is simple – token issuers must sign new contracts, and, essentially, pay a listing fee for their tokens. If this doesn’t happen, OFN indicates that on May 21st, all tokenized securities will be de-listed from its platform.

Why It Matters:

This was a slow week in STOs, – slowness itself is news.  Chicago-based OFN has been a trendsetter, launching the first digital securities trading platform in 2019.  OFN offered free listings.  Exchanges typically charge initial and annual fees. Now OFN needs to have its operational costs covered by issuers because trading volume has been so anemic commissions are not at meaningful levels. 

Japan’s Financial Watchdog Certifies Two Cryptocurrency Regulatory Organizations

Japan’s financial watchdog has accredited two crypto-focused associations as Certified Financial Instruments and Exchange Associations.

According to an April 30 announcement, the FSA has recognized the Japan STO Association and the Japan Virtual Currency Exchange Business Association (JVCEA) as self-regulatory groups for derivative transactions and security token offerings of crypto assets. JVCEA will subsequently be renamed the “Japan Crypto Asset Trading Business Association” on May 1.

Why It Matters:  

This is an iterative move forward for the Japanese industry. There are approximately 21 registered and licensed exchanges in Japan, with three additional companies registered as second-class members (major American crypto exchange Coinbase, Digital Asset Markets and Tokyo Hash).

 

 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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Security Token news for Week ending 24 April 2020

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Security Token news for Week Ending Friday 17 April 2020

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

Space MMO Infinite Fleet Launching Security Token Sale

Shanghai game studio, Pixelmatic, is working on a science fiction MMORPG Infinite Fleet and is launching a security token offering to raise funding. The company is working with venture capital platform Stokr to raise money for its upcoming game.

Why It Matters:

Video gaming and cryptoasset technology are natural marriage partners, both in technology and culturally. Pixelmatic claims Infinite Fleet will be the first world-class video game to genuinely bring together gaming and cryptoassets. Interest in blockchain tech from global game publishers has been increasing, especially considering that a number of blockchain-based games have recorded rising numbers of users due to the ongoing COVID-19 pandemic.

Infinite Fleet players defeat alien threats by building fleets, securing territories, and moving into space.  Players earn reward tokens that will be tradeable and hold promise of increasing value.  The breakthrough here is Pixelmatic attempting to sell equity funding by an issuance of equity tokens – one could say to boldly go where no gaming man has gone before. We’ll soon discover if it can find strange new life in the security token capital market.  

Blockchain Association Creates New Security Token Working Group

US trade associaition, The Blockchain Association, has created a Security Token Working Group to collaborate with industry participants, policymakers and regulators. The group will be co-chaired by Georgia Quinn, General Counsel of CoinList, and Alex Levine, Chief Legal Officer of TokenSoft, two primary issuance platforms that are regulatory compliant. The objective is to help create “clear regulations” for the emerging security token sector of Fintech.

Why it Matters:

The Blockchain Association is organizing to lobby Congress, the SEC, FINRA, other US regulators and the broader industry to promote the adoption and regulation of security tokens in the United States. Many industry followers believe digital securities will launch a new era of securities while opening up markets further to a wider audience.  In Japan, The Japan Security Token Offering Association (JSTOA) recently published self-regulatory guidelines which cover how to separately manage client assets and digital record transfer rights and obligations.

TokenGX Gets Greenlight to Develop Secondary Trading Platform for Canadian Market

This week, the Ontario Securities Commission greenlighted the tokenization startup TokenGX to begin development on a secondary trading platform for tokenized securities. The new platform, dubbed FreedomX, will allow Canadian investors to leverage blockchain technology in the local financial sector. As such, the news represents a major milestone for the entire North American market.

…Importantly, FreedomX incorporates advanced smart contract technology to ensure full compliance with Canadian securities regulations. These self encoded restrictions will allow developers to gradually introduce the exchange to users based on their geolocation. At first, developers intend to restrict access to only Ontario residents and an exclusive group of invited whitelisted investors who already met all financial and kyc requirements.

Why It Matters:

FreedomX will be one of the first secondary trading platforms for Canadian-based digital assets and should play a major role in the digitization of the Canadian financial sector.

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Security Token news for Week Ending Friday 17 April 2020

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

ZenSports Issues Security Token Dividends 

This week, the blockchain-based mobile betting app, ZenSports announced the issuance of quarterly dividend payments to SPORT security token holders in the coming days. Notably, ZenSports was one of the first betting platforms to embrace security tokens.

Why it matters: This is a big step forward for a sports token to pay dividend. The paying of a quarterly dividend is a big confidence-booster for San Francisco-based ZenSports. The SPORT security token was sold to accredited investors through a Regulation D/Regulation S offering in 2018, with ZenSports entering the market as one of the first decentralized peer-to-peer sports betting mobile apps. The Company’s direct betting system obviates the need for bookmakers. ZenSports has ambitious plans for more crypto integration, with the planned issuance of a utility token this year.

Black Manta Capital Introduces $12 Million Real Estate Security Token Offering

Germany-based Black Manta Capital Partners has introduced a $12 million security token offering (STO) for the Berlin real estate market.  The initiative is reportedly a collaboration with Tigris Immobilien, a German real estate company. Approximately 2000 sq meters of real estate property, which mainly consists of individual small apartments units (40 to 60 sq meters each) are being offered by the project. Construction is scheduled to be completed within the next two years. The units may be sold to owner-occupiers and qualified investors.

 

Why it matters:  This is another step toward real estate tokenization in Germany.  This offering will allow ordinary investors to participate in the type of deal usually restricted to institutional or accredited investors. Minimum investment is €500. The STO is regulated by Germany’s financial regulator, BaFin.

 

Algorand has launched a multi-million dollar program to foster its blockchain ecosystem

The Algorand Foundation has launched a new grants program worth $50 million in ALGO tokens to build out its borderless economy.  To spur ecosystem growth, the foundation announced the launch of a 250-Million Algo Tokens (ALGO) Grants Program this week. The program has a long term, global focus and will provide funding to projects building apps that support infrastructure, end-user applications, and research innovation on the Algorand blockchain.  The potential use cases include DeFi, payments, asset exchanges, social media integrations, supply chain initiatives, copyright authentication, and asset tokenization. Algorand intends to enable an active blockchain community via a public, permissionless, pure proof of stake blockchain with an open-source approach.

Why it matters: This may be a shot in the arm for global blockchain infrastructure.  Algorand, Inc. is a technology company founded by MIT professor and cyptography pioneer, Silvio Micali. The Algorand platform is designed to deliver true decentralization, scale and security.  In June of 2019, Algorand raised $60 million in four hours by auction of Algo coins via Coinbase out of Singapore. The previous year it scored $66 million in a conventional capital raise from American East Coast VC firms.

The Algorand Foundation helped make the World Chess hybrid IPO possible,  a hybrid IPO that included a security token offering and a London Stock Exchange listing.  Conducted via digital securities platform, Securitize, on the Algorand blockchain, the Hybrid IPO utilized a new Algorand feature making it possible to tokenize and issue any type of asset, in this case, stock.  Securitize has a partnership with Algorand to support its DS Protocol, which will allow issuers the ability to issue Securitize powered digital securities on the Algorand Blockchain.

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.

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

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