The Singapore Stock Exchange (SGX) and Temasek's subsidiary have invested in iSTOX, a capital markets platform where issuers can raise capital via security token offerings. The demands of the next generation of investors and issuers calls for a shift in how the process of capital funding will be approached.
The Wild West days of crypto funding are over. The initial excitement over ICOs seems to have faded as rapidly as it has started. When implementing an ICO, a company doesn’t have to sell equity, and users can buy tokens for use, making it beneficial for both parties. However, as utility tokens are not an investment in the company itself, the users aren’t entitled to anything from the company.
Tokenizing real-world value has been an idea making the circles in crypto space. From buildings to businesses or metal mining rights, offering to own a part through a cryptographic token is seen as a viable investment opportunity. But tokenizing artworks has also been a part of the business.
SportsLedger has officially announced plans to launch an STO. In early 2018, the company had announced plans for an ICO, which were soon halted due to regulatory concerns. Other companies are also likely to make the transition to STOs to ensure compliant offerings. Purchasers of the SportsLedger security token will be entitled to future dividends and, in the event of the company being sold or going public, a conversion into common equity will be possible.
Even traditional businesses are launching STOs: “We already have all the technology, we have a great ice cream brand and we plan to expand all over the world. It’s very simple: people will get a percentage of sales, we planned around 2%. If you have the token, you get the royalty paid directly to you.”
Digital assets have many advantages when integrated with blockchain technology. Benefits include overall efficiency, security, and transparency. But institutional investors have displayed hesitation when it comes to entering the cryptocurrency realm. A major reason has been unclear regulatory guidance.
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With the SEC’s recent hardline stance on unregulated ICOs, security token offerings (STOs) are now the only means for cryptocurrency crowdfunding in the United States. This places a lot more prominence on tokenized securities. Recently, many stakeholders have been expressing their confidence in the emerging security token paradigm.
LXDX, the high-speed cryptocurrency exchange founded by a former SpaceX engineer, will issue stock through a security token offering (STO). LXDX will issue 5 million tokens that collectively represent a 10 percent ownership share in the exchange and will entitle token holders to 10 percent of the exchange’s quarterly adjusted gross revenue.
Major South Korean cryptocurrency exchange Bithumb is the number one crypto exchange, with a 24-hour trade volume of $1.7 billion. Bithumb has reportedly signed a deal with an American fintech firm in an effort to open a securities token exchange in the U.S.