We’ve seen modest growth in security tokens in 2018. However, it hasn’t quite been the explosion that many analysts predicted. Now, some of those same analysts suggest that 2019 could be the year for security tokens.
This past week, analysts released two key reports on the growth of security tokens in 2018. As reported by news.bitcoin.com, the reports show the growth of security tokens in 2018 – but they also show how much further the industry has to go.
What’s The Point Of Security Tokens?
In 2017, we saw an explosion of initial coin offerings (ICOs) with unclear goals. Companies would launch an ICO selling vague shares in a project. These coins or shares weren’t technically stocks. They weren’t securities. They were just tokens that would increase in value as the project grew.
It was obvious that these ICOs wouldn’t last. The SEC and other regulatory agencies worldwide began viewing these tokens as securities. The scammy ICOs started to disappear.
Instead of crushing the crypto market, however, the increased regulation led to a new trend: regulated security token sales.
Companies could no longer sell tokens that vaguely functioned like securities. Instead, they sold tokens that would officially function like securities.
That has led to the rise of Security Token Offerings, or STOs. Some saw 2018 as the year STOs would take off.
Two new reports from Hashgard and ICORating.com reinforce the growth of STOs while also showing we still have room to grow.
There Was Modest STO Growth In Q3
The first report from ICOrating.com shows that increase in STOs has steadily increased throughout Q2 and Q3 2018, although growth has been relatively small.
Between Q2 and Q3 2018, for example, the share of projects offering a security token increased by just 1.66%.
The share of projects offering utility tokens, meanwhile, decreased by 10%.
One of the problems facing STOs is the lack of capable exchanges. Many exchanges are able to handle basic token sales and offerings. Other exchanges, however, cannot handle regulated, legal security token sales.
This has led to a shortage of platforms where companies can launch their STOs.
Today, the most popular STO platforms include Tzero, Polymath, Harbor, Swarm, Securitize, and Securrency. However, even among these exchanges, there are differing security token standards. Polymath, for example, uses the ST20 protocol for Ethereum-based security tokens. Startengine, on the other hand, has created a brand new security token standard called ERC1450.
Could 2019 Be The Real Year Security Tokens Take Off?
We’ve seen modest growth in security token sales over the past year. However, there’s still plenty of room to grow, and STOs haven’t exactly exploded with growth to date.
That’s why some point to 2019 as the year STOs really take off.
“Significant progress has been made over the last 10 months in developing security token standards, trading platforms, and obtaining regulatory approval,”
Nevertheless, many companies have STOs waiting on the sidelines until the SEC and other agencies submit clearer regulations:
“Many other aspiring STO projects are still waiting patiently for the SEC to approve their Reg A+ application that will enable them to sell security tokens to the public.”
The Hashgard report uses Singapore’s Blockchain Capital as one successful STO example. Earlier this year, Blockchain Capital raised $10 million via an STO.
Despite these success stories, STOs have not yet exploded with growth. That could change in 2019. Or, security tokens might never take off, plagued by differing market standards, unclear regulations, and a lack of regulated exchanges. It remains to be proven if STOs are the fundraising system of the future – or if they’re destined to fizzle out.