I’ve noticed many articles about offering of security tokens (STO) and how it will make the crypto industry more transparent, safe and stable. This notion spread really fast and now it is believed that it is the end of initial coin offering (ICO) and a new era of STO. But is it actually good for the market?

When I first read about the ICOs, my eyes paused at words a “new way” of raising money. The Blockchain was introduced by enthusiasts as an innovative tool to grant more freedom and the start-up pitches started with the burning desires to change the world, make it more decentralized.

However, now we hear that crypto projects should follow the laws, prepare prospectuses, concrete 3-year business plans and offer tokenized securities, like the word “tokenized” drastically changes the colour of securities from traditional to an innovative one, but it doesn’t.

In my view, if you desire to go traditional way and offer securities, don’t try to play with the card of “tokenization” and state that by putting your security tokens on the Blockchain you will “guarantee” safety for your investors. Currently there is no safer way than initiating public offering of securities without Blockchain and trade your shares or bonds on Nasdaq. You don’t need to think about vulnerabilities of your smart contract and spend thousands of hours trying to figure out how to prove to community that your project cannot exist without the Blockchain, when actually you would thrive better without it.

Do we need to follow the rules?

Yes, we do. However, not the existing ones.

As we may notice, the market has already shaped the rules. In early 2017 it was enough to have a poorly written whitepaper and three team members with zero business or programming experience for the project to raise 10-20 mil. Now you have to gather at least 20 highly motivated professionals, already develop an alpha version of the product and be ready to spend 300k on your marketing strategy. This is the law that improves every day and is shaped and controlled by the market itself.

Another great example is the establishment of rules for conducting proper ICOs. For instance, the Maltese Parliament has recently approved three bills on ICOs and Blockchain projects. The bills established a separate regulatory body, outlined specific guidelines and information for preparation of the white paper and indicated certain authorization processes for crypto exchanges.

Even though I truly love only the first option, the regulated market is a far better approach than backing Blockchain projects with a “turbo tokenized equity” or a “very cool and super tokenized bond”.

Let’s dive into the future, not the past

The main goal of ICO projects shall remain to present their tokens as a “utility”, while being recognized by the regulators as a security must still be considered to be a blunder. If we are to follow the STO model, instead of going forward and creating a better environment for coin offerings, we will be heading backwards and instead of buying young entrepreneur’s “promise”, we will buy old grandpa’s “guarantees”.

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