Experts say the STO markets will soon be valued at $24 trillion

ICO shortcomings have given STO a chance to shine

Several countries have formulated regulatory frameworks to attract both STO and ICO organisers

While initial coin offerings (ICOs) have reigned supreme in the distributed ledger technology (DLT) and cryptospace as a viable means of raising funds for startups and established firms alike, the trend is however fast changing and securities token offerings (STO) are quickly becoming a force to reckon with in the cryptosphere, reported South China Morning Post on November 26.

The Reign and Downfall of ICOs

While the world’s flagship cryptocurrency, Bitcoin has been in existence for a decade, with established altcoins like Ethereum appearing on the scene just a few years ago, 2017 was the year that brought digital assets and initial coin offerings (ICOs) into the consciousness of a vast majority of people.

Last year, experts in the matters of cryptos as well as newbies to the industry made quick bucks from ICOs, as the surging price of Bitcoin sent all altcoins to the moon.

According to a Business Insider report, more than $3.5 billion was raised by blockchain startups via the now controversial ICOs, with projects like SALT ($48 million), Kin ($98 million), Qash ($106 million), Status ($107 million), Polkadot ($145 million), Bancor ($153 million), Tezos ($232 million), Sirin Labs ($157 million) and Filecoin ($257 million) generating outrageous amounts of money.

While a good number of credible projects were birthed via the 2017 crypto and ICOs boom, rogue actors also seized the opportunity to launch scam fundraisers, prompting regulators to increase oversight of the crypto industry.

In June 2018, reports emerged that more than 1,000 ICO projects have failed so far, from abandoned projects to outright fraudulent scam schemes.

STOs To the Rescue?

Unlike 2017, 2018 has been a year of regulation and a depressing market downturn.

The wild roller coaster ride of last year has awakened the senses of global regulators, with some jurisdictions like Malta, Gibraltar and a few others formulating amenable laws for blockchain-linked businesses to thrive while several others still sit on the fence, instilling FUD in the hearts of investors.

Per a token report by Fabric Ventures, 58 percent of all ICOs in 2018 have either failed to raise funds, disappeared or simply refunded contributors.

In June, the U.S Securities and Exchange Commission (SEC) Chairman, Jay Clayton made it clear that all coins and tokens generated through ICOs are securities and as such, organisers must register with the agency.

Security tokens are DLT-based tokens backed by an underlying asset like stocks, bonds, artworks etc. and shares the profits, pays dividends or interests to token holders based on the performance of the assets.

These types of tokens offer investors a form of protection for their investment, and it is estimated that this industry will hit $24 trillion shortly as traditional businesses start tokenising their assets.