By Dan Doney, CEO, Securrency
The security token industry was expected to take off in 2019 but failed to live up to the hype. Following major strides byregulators and increased investor scrutiny of the security token industry over the past 12 months – from the UK’s Financial Conduct Authority (FCA) to the US Securities and Exchange Commission (SEC) granting Reg A+ approval to Blockstack -will 2020 mark the year of the security token? Dan Doney, CEO of Securrency, a leading developer of institutional-grade blockchain-based financial and regulatory technology, has provided his predictions on what 2020 will hold for the security token industry.
#1: What will the security token industry look like in 2020?
We believe that 2020 will see an acceleration of the trend that links incumbent financial service providers with emerging security token firms to tokenize institutional grade assets. We should see tokenization platforms emerge provided by some of the largest technology firms (like Microsoft and Facebook) and issuances from highly trusted investment firms and asset managers.
#2: What challenges still need to be overcome for this industry to thrive, and how close are we to seeing adoption from both a retail and institutional perspective?
The biggest challenge is the gap between traditional financial services and the yet to develop tokenization markets. The gap remains in terms of market liquidity, user experience, cost structures, availability of high-quality assets, and the convenience and trustworthiness of retail investment options – but this will change in 2020. Previously, most security token offerings have been exempt offerings and only available to qualified investors. However in 2020, as issuance platforms mature, compliance tools proliferate, and regulatory certainty solidifies, publicly-traded assets will soon be available as tokenized securities. As issuance costs fall to a few basis points and back-office reconciliation costs are eliminated, tokenization will compete on price with mature and trusted institutional models – bringing new, trustworthy assets into tokenized markets. In turn, institutional assets, that can be easily priced, will bring market liquidity. Market liquidity begets convenient transactions. Without these fundamentals, the tokenization industry has yet to achieve exit velocity. But the conditions are right for the breakthrough to begin this year.
#3: What category of tokenized assets do you predict will have the most traction in 2020?
We’re excited about the tokenization of publicly traded assets. The disclosure requirements, strong pricing signal, and existing liquidity of these assets will bring much-needed liquidity to the security token markets. These assets, backed by some of the most known and trusted financial service providers, will create the liquidity and trust needed for the foundation of the security token industry.
#4: What are you most excited for in 2020?
We’re excited to work with regulators who are embracing participants in the industry who seek to augment regulatory compliance rather than avoid it. We’re also excited for intuitive user interfaces that demystify blockchain for investors, issuers, and everyday retail participants. Coupled with high-quality, yield-bearing token issuances and efficient global transactions, 2020 will finally be the year we unlock the accessibility which fuels mass global adoption – the dream of blockchain enthusiasts for over a decade.