STO:Secondary Market Updates

Welcome to Digital Security Frontier Vision: The Voice of the Core Builders from Global Digital Security Industry #30.

This week we are welcoming Kyle Sonlin from Security Token Market,and he is also the Host of The STO Show podcast. stomarket.com is a repository of live security token data worldwide.

Now,there are 9 Trading Tokens listed on stomarket.com,let’s talk about the secondary markets, and what could come on the security token industry in 2020.

Enjoy the Interview!

1. Can you share with us what STOmarket does?

Security Token Market (stomarket.com) is the largest repository of live security token data worldwide. With a collection of hundreds of security token offerings, programmatically-updated pricing on secondary markets, and an active community through our news aggregator (stomarket.com/news) and podcast, The Security Token Show, we strive to empower our users to make sound financial decisions by properly doing their own research to understand this growing industry. It is the first and only source for secondary market data for security tokens across all countries around the world.

2. We witnessed the ICO boom in 2017 with the follow-up crash in 2019. Why do you personally feel that STOs will be different?

ICOs presented an extraordinary new way to raise capital for issuers: directly from consumers. For the first time, people all around the world were able to invest in new technologies and innovation, and have the freedom to exchange and trade with others anywhere else worldwide. However, with ICOs, the investors themselves were not actually exposed to their fair share of the business, receiving no equity, revenue or any other protections from the business, instead leaving them without upside. With security tokens, investors are properly aligned with the issuers while still maintaining the disrupting potential of blockchain-based transactions and settlement, including smart contract automation, transactional security, and international interoperability.

3. According to your observation,how is the security token ecosystem and community in the U.S?

The US has been a leader in the security token space due to its progressive regulations passed well before even the ICO boom occured in 2017. In 2012, the JOBS Act was passed that laid out clear rules for properly raising capital through crowdfunding from investors. With additional clarity led by the innovations in blockchain, along with community feedback like a push we helped lead in 2019 along with others that were submitted directly to the SEC regulators, many doors are opening to allow all investors around the world to buy and sell fractionalized ownership in companies, real estate, venture capital funds, and more.

4. Recently, STOmarket released a report on the state of the current STO market. Were there any findings in these report that you can share with us?

2019 was a groundbreaking year for the security token industry. In less than 12 months we saw the initial launch of secondary trading for these tokens, and even were able to see live security tokens available to retail investors. Some of the most exciting offerings have been the funds which invested in successful blockchain startups and are now reaping the rewards, as well as the real estate offerings, which feature daily dividend payments of over 10%, in addition to 20–30% increase in equity value. These tokens have performed very well. Some other tokens, however, have struggled as the industry learns more about how to structure quality investment offerings and that information needs to be published as well. We post monthly reports via our Medium channel detailing each and every day of trading, as well as featuring hourly updating prices on our website at stomarket.com.

5. Now there are 9 Trading Tokens listed on stomarket.com, what are the selection criteria?

Security Token Market focuses on publishing the data on all live security token offerings worldwide. After our team verifies the licenses and processes of an exchange and its listed asset-backed tokens, we list them on our platform. We have a pipeline of many issuers who have successfully raised money and are currently finalizing the regulatory process, so we expect many more in the near future. We also have had conversations with over sixty security token exchanges that are planning to launch in 2020, many of which are in Asia, Europe, and Africa.

6. Many people think that the biggest problem of the digital security industry is the lack of liquidity. What do you think? And how can we solve this problem?

I think liquidity is a very complex term that can represent separate, more solvable problems that will help scale the industry. First and foremost, the main goal that we, as a community, should collectively be working towards is continuing to promote high quality assets and great token structures. With attractive offerings that perform successfully on secondary markets, investors will feel more confident participating and endorsing this new asset class.

Additionally, by defining these assets as securities and following the proper regulation provided by jurisdictions around the world, we are building a much more connected financial system, allowing asset transfer seamlessly between jurisdictions. Without many exchanges and marketplaces to enable issuers to launch new tokenized assets, it can be difficult to accomplish key facets of asset valuation including price discovery, DCF analysis, and disclosure reporting, so firms must continue to focus on achieving the proper certifications and licenses to provide trading platforms for interested investors.

7. Recently, SEC looks to expand definition of ‘accredited investor’, and various proposals put forth amending prospectus exemptions, what does this mean?

The SEC here in the United States has separated investors into two categories based on whether they are “accredited” or not. An accredited investor is actually just someone who meets certain income or asset thresholds. Here in the US, around 8% of the population meets this accreditation standard. The SEC believes that with enough money, an accredited investor can afford to take more risks with their investing, allowing them to invest in assets that do not face the same public reporting requirements that are mandatory for publicly traded companies including quarterly reporting and yearly auditing.

However, via the JOBS Act of 2012, the SEC has enabled issuers to raise capital from non-accredited (often called “retail investors”) for their companies as well. The process requires legal assistance, but through the use of technology providers in the security token space, the process is becoming easier and easier to allow the general public to buy and sell security tokens. As of today, two live security tokens are freely traded for the public here in the US, tZERO’s TZROP token, and Lottery.com’s LDCC token. Many more are expected to go live in the second half of 2020.

8. Is there anything else that you would like to share about stomarket.com?

We expect to list many more exchanges and tokens on the website soon so be sure to check back in often! Soon, we will launch an API to help share this information programmatically. If you are interested in working with us or have questions, you can reach out to me directly at Kyle@stomarket.com or find me on twitter @kylesonlin.

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