Tokenized securities is one of the hot themes for 2019. Who do you think will be the first buyers of tokenized securities? Will they be family offices? PE/VC funds? Another type of capital?
ArtToken, Robinhood Equity Token, FarmCoin, Sparklabs, VSJ real estate fund, The Hub at Columbia REIT are all open. ArtToken has closed 2 rounds already and is raising a 3rd due to demand I believe.
Swarm has issued most of them: https://invest.swarm.fund/explore
Securitize issued the tokenized securities for Blockchain Capital, Spice VC, 22x, and Augmate as well.
To answer the question, I first went back to understanding what security token is. Pomp calls these as “digital assets subject to federal security regulations. In layman terms, they are the intersection of digital assets (tokens) with traditional financial products — a new technology improving old things”.
Reference article is this. I read this a while back while researching my bit on the new buzz of security tokens in later half of 2018.
In my view:
- Retail - In a coming few years, for most general/retail investment scenarios, differentiating b/w utility vs. security will be difficult and if the market shows up swings, money can flow in in the same way as was the case with ICOs. But with clarity on the differentiation, situation could be similar to financial securities/products with fiat, as are offered and sold to retail buyers now. Retail investors seem to be equally likely to buy along with PE/VC, albeit in the last mile of issuance with no discounting
- PE/VC - There are active equity funds that are purely digital asset focused while there are also some funds which want to diversify to digital assets (currently work in fiat). If ETFs become reality, it could become a sweet spot for these to buy into. They might be the first ones to get into the game. For e.g. Sequoia Capital got invested in Bakkt. This is a fiat infusion but Bakkt but could be possible that Bakkt could likely take STO and then issue tokens to Sequoia
- Institutional investors - Institutional investors are domain based for e.g. commercial banks vs. insurance companies.I think they will be the last ones to move into because institutional money usually flows with some logical fit into the product/company they are investing in. The crypto space is ripe with ideas but there are limited success stories built when it comes to utility. A lot of commercial banks for e.g. are doing in-house blockchain experiments rather then betting money outside (BOA and People’s Bank of China have surprisingly has a large # of patents in tech). There is a certain level of confidence they might want to build in the tech before vetting
Thanks for providing the link to invest.swarm.
Do you mean the first institutional buyers? The first buyers of tokenized securities are individuals that already owned crypto. The original buyers of BCAP and Science are people that already held crypto.
I meant what subgroups do you think will be the first major purchasers of tokenized securities.
For example, retail traders from Japan, South Korea, US, and China drove the ICO craze in 2017. Do people believe that family offices will be the first major buyers of tokenized securities? PE firms? Wall Street banks? HNW retail buyers?
In my opinion, we haven’t seen a major wave of buyers for tokenized securities yet.
No. Nobody yet. It’s difficult because I don’t see an alternative to Banks/retail buyers driving widespread use. They’re only getting in the game with friendlier government adoption, and that’s going to take time. Imagine if Lyft did a Digital IPO?