Welcome to Digital Security Frontier Vision: The Voice of the Core Builders from Global Digital Security Industry # 20.
Frederik Bussler, the 19-year-old man who leads the Security Token Alliance.he is also the CEO of bitgrit, Chairman at WDSF,and Advisor at SHORTEX and klimazone.
Today he is talking with us about Security Tokens in America, Europe, Asia and will especially help us to know more about Security Tokens in Asia.
Enjoy the Interview!
- You have multiple roles. In May 2019, why did you want to establish the Security Token Alliance?
The Security Token Alliance was borne out of the realization of the need for unity and shared standards within the security token industry. Many security token projects are operating blindly in terms of regulatory compliance, which technical protocols to use, how to get liquidity, and so on. In order for projects to succeed in a more regulated and more competitive environment, they need to collaborate with a powerful, world-class educational organization.
2. Currently, the members of Security Token Alliance are all over the world. According to your observation, what is the current development of digital securities in the United States?
We actually have a very even distribution of members across the US, Europe, and Asia. The development of digital securities is clearly correlated with the favorability of the regulatory climate. The US regulatory climate is riddled with confusion and uncertainty relative to some of its counterparts in Europe and Asia, such as Estonia and the UK, and Hong Kong and Singapore. Further, some securities legislation varies state-by-state in the US, so there is intense difficulty in being compliant in all 50 states, leading to stalled development of projects.
3. What do you think are the trends in STO in the United States？
Unfortunately, one of the most obvious STO trends in the US is that many ICO and crypto projects are simply re-branding as “security tokens,” de-legitimizing the industry. The same holds true for many advisors and consultancies. As a result, there are 10x as many supposed “STO advisors” as ST-projects in the US. Another trend is that, frankly, Security Token projects are failing a lot faster and harder than expected. I think this is a good sign because it means that the weaker projects are being stomped out, reducing the noise in the market and bringing the focus to serious projects.
4. What is the development of security token in Europe? What are the characteristics of the digital security industry in Europe compared to the United States?
In Europe, the more favorable regulatory fabric compared to the US means that fewer projects are experiencing what I call “soft failures.” In the US, several security token projects planning STOs have pivoted to ICOs, IEOs, private placements, or entirely different business and capital raise models. Since they set out to conduct an STO but failed due to the legal complexity, it’s not a total failure, but it’s definitely not a sign of success.
5. Security Token Alliance is located in Japan. According to your observation, what are the characteristics of the development of digital securities in Asia? What are the trends?
One clear characteristic of digital securities development is that significantly more emphasis is being placed on both infrastructure and organizations than on actual digital securities themselves. Essentially, there are 4 kinds of infrastructure pieces: Issuance platforms, broker-dealers, marketplaces, and custodians.
There are easily over fifteen competitors in every category (except for custodians), and at least another 10 industry organizations (Japan Virtual Currency Exchange Association, Japan Security Token Association, GIASTEC, Security Token Business Association, Security Token Academy, Security Token Advisors, Security Token Network, Security Token Group, NEO Digital Asset Alliance, and of course my favorite, the Security Token Alliance), just to name a few. There are several industry organizations and infrastructure companies to every security token project, so the industry is incredibly imbalanced.
6. At present, what is the Japanese government’s attitude towards STO? Has the first STO in Japan already appeared?
So far there hasn’t been a single STO in Japan. I recently attended the V20 conference in Osaka (a G20 spin-off event on virtual assets), with a lot of discussion from the Japanese government on Security Tokens. The FATF (the Financial Action Task Force) is the one organization to pay tremendous attention to for Security Token projects in Japan. The JVCEA is also to be considered for exchanges.
The Japanese government’s view is entirely reflective of that of FATF: That security tokens are not exempt from traditional securities rules and must comply with the same KYC/AML/CFT regulations. Further, all STOs must be licensed and registered, and subject to monitoring systems.
7. What do you think the development of Japanese digital securities will inspire other Asian countries?
Japan is such a traditional, conservative, and change-opposing culture that the presence of Japanese digital securities would make other Asian countries think: “If Japan can do it, so can we.”
8. What other interesting areas do you think to have the potential of STOs?
Besides things like equities and debt, I think high-ticket and naturally appreciating real assets are a very interesting use-case for STs and STOs. Tokenization of assets makes sense for opening up investments that are typically difficult to invest in, like supercars, yachts, parking spaces, diamonds, and so on. In particular, a whiskey STO would really get my attention. Imagine an STO that opens up 50,000 barrels of whiskey for a crowdsourced capital raise, where investors have an obvious intuition that whiskey will only increase in value over time. I haven’t seen anyone take the idea yet!
9. At present, digital securities are at a very early stage. What kind of impact do you think increased cooperation among practitioners will bring to this industry?
For one, I hope we can consolidate most of the infrastructure and organizational projects. Given that there are far more infrastructure projects and alliances than actual Security Tokens, I think it actually makes sense for M&As to be happening pretty soon. You’d think we’re way too early in the space for M&As, but the reality is that there are so many highly similar, competing projects with wide ranges in progress that it makes sense for projects to merge and acquire other projects, leading to bigger and better industry leaders. Psst, I’m talking to you, several other smaller security token organizations with no real value-add.
10. Many people think that the biggest problem of digital security industry is the lack of liquidity. What is the reason for that? and how will you solve this problem?
Every problem in the Security Token industry can be solved with greater resources except for one: liquidity. There are problems with a lack of shared standards, problems with a lack of knowledge, problems with a lack of regulatory understanding, and so on, but these can all be solved relatively easily by industry organizations. Liquidity can only be solved by the market as a whole making a regime change, either from crypto to Security Tokens, or from securities to Security Tokens, and we can help facilitate that change with education, but we can’t be the root cause. At the end of the day, STA is making big waves in the financial industry, but we need a tsunami if we want security tokens to really take off.
- Check Chinese version of this interview here
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