Matthew Le Merle Thinks Security Tokens Offerings (STOs) Are A Risky Asset
Security token offerings (STOs) were hailed to be the modern-era initial public offering (IPO). Security tokens are financial securities that and their issuers must abide by the regulations of the financial watchdogs of their HQ country. The benefit from this is that, while ICO issuers were free to use raised funds on whatever they wanted, STO issuers will have a fiduciary responsibility to properly handle investor capital and rightfully allocate it to product development, or else there will be a legal repercussion.
However, few are buying it. On the one hand, the sector is expected to be worth over $200B this year according to some analysts; on the other hand, most of these security token companies will go bust due to lackluster business models.
Security token expert Matthew Le Merle recently compared STOs to be resting on a knife’s edge in an interview with CryptoBriefing.
First of all, investors face issues. Digital tokens carry technological risk, regulatory risk, and market risk. Without a liquid market ready and waiting, private placement investors have little incentive to layer risk on top of the risk-return they already understand. To add to this problem, effective bankers and broker-dealers charge a premium for primary issuance; the more effective they are, the less incentive they have to adopt, especially given their investors are not clamoring for this product.
Cryptocurrency commentator Il Kadyrov points out, Atomic Capitals’ DDS token standard has a function which is called forceTransfer. This allows the issuer to transfer tokens without any regard for restrictions and without your permission. This is a recipe for disaster.
Putting money into any new venture is risky, let alone a field in such flux. Reselling a coin that represents a share of a condo complex might be easier than selling a traditional part-ownership. But many analysts worry STOs could end up being yet another field filled with schemes to leave investors holding the bag. Some of these security offerings could just end up being left-over junk that nobody else would buy.