Security token offerings aren’t looking much better in 2019

An analysis of a year of liquidity and trading data Pressed to explain who is using them, and why, 99 percent of cryptocurrencies let out all their air, go flying around the room making a raspberry sound, hit the wall and fall behind the couch forever. The party is over. A few, however, can present a credible use case. “Tokenized securities” could be one of them: a more open and efficient way to transact shares and notes as well as distribute cash flows. Proponents of “security token offerings” (STOs) have been telling that story now for a little more than a year. This data report canvases the market, finds few are buying it, interviews market participants for perspective and reveals gaps in the use case at the ground level that explain its failure to thrive. In October 2017, the market for “initial coin offerings,” or ICOs, reached a peak, with more than 100 capital raises closing through the sale of crypto tokens, according to market data provider Token Data. Proponents thought these tokens were an innovation on par with the joint stock corporation: not a claim on cash flows, but a vessel to participate in and directly capture the value latent in network effects. “Tokenized” networks raising money that month ranged from the prosaic, like a no-fee crypto exchange called Cobinhood ($13.2 million), to the ludicrous, like Dentacoin, “the blockchain solution for the global dental industry” ($1.1 million). At the time, it was nearly unheard-of for such a project to acknowledge its token might be a security like the mundane stock certificate. In the following months, the US Securities and Exchange Commission (SEC) sent dozens of subpoenas to token issuers, indicating that they disagreed. By the following March, the number of SEC registrations for new token offerings equaled more than half
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