Security Token Market Forecast 2021
US security token exchange “tZERO” announced integration into “Refinitiv”, which distributes stock information in real time. Refinitiv has partnered with more than 40,000 companies / organizations in more than 190 countries to facilitate equity analysis / research around the world. (London Stock Exchange will acquire) Leading the security token market, including the launch of tZERO Markets, tZERO is playing a major role in the mutual development of digital assets and private placement markets.
The future of the security token market
tZERO Markets, a subsidiary of tZERO, has been approved by the Financial Industry Regulatory Authority (FINRA) as a broker-dealer, allowing individual investors to trade security tokens on tZERO through the app. By being able to carry out trading brokerage / self-trading operations in-house, more efficient operation will be possible. In the future, the tZERO ecosystem is expected to expand, such as increasing the number of stocks handled by direct listing / opening the Boston Security Token Exchange (BSTX).
Recently, Securitize, which is well known in Japan as a security token issuing platform, announced a launch plan for the security token exchange Securitize Markets. Infrastructure is being developed in the United States, including INX and Texture Capital, which are also aiming to open a security token exchange. In the IPO market in 2020, it has been confirmed that large-scale financing is carried out through direct listing (direct listing) and IPO of SPAC (special acquisition purpose company), and growth companies are merged / listed with the funds. When considering an exchange business in a private placement market, it may be necessary to incorporate that element in the conceptual part.
An environment has been created in which a large amount of funds can be raised by raising funds in the private placement market without raising funds through an IPO. In the future, it is expected that the momentum for revitalizing transactions / improving liquidity in the private placement market will increase. On the other hand, IPOs of tech start-up companies such as Airbnb and DoorDash are attracting a lot of public attention. In the stock market, efforts to transform the market in pursuit of structural rationality and coexistence with the conventional market will be planned in the next 10 years. With digital assets being accepted by institutional investors as a new asset class, the security token ecosystem has great potential.
The security token ecosystem is responsible for a wide range of areas, including not only the development of the private placement market, but also the issuance of securities on the blockchain by financial institutions and the tokenization of rare and valuable assets such as real estate. The security token exchange is expected to support the growth of the market as its foundation.
Current state of the security token market
In 2020, the move to open a security token exchange to improve the liquidity of the private placement market has been confirmed in the United States, and efforts are underway to rationalize the market structure. Texture Capital, a service provider for institutional investors in the private placement market, has been approved by the Financial Industry Regulatory Authority (FINRA) as a broker-dealer / ATS.
The US private placement market, which has grown due to deregulation since the 1990s, boasts a size of $ 2 trillion. On the other hand, unlike the traditional stock market, the infrastructure development that allows many investors to participate was limited. In recent years, the Nasdaq Private Market, Forge, and Clear List, private equity trading platforms for institutional investors, have also been utilized. The potential demand for security token exchanges that connect digital assets to the private placement market is likely to be high. US companies and funds have raised $ 1.5 trillion in 2019 in compliance with Regulation D, but most private placement securities are not traded in the secondary market.
Therefore, tZERO, Securitize Markets, INX, Texture Capital, etc. are currently aiming to build an ecosystem that seamlessly integrates the issuance and distribution of security tokens. It is important to take a more comprehensive view of the entire market, such as securities issuance on the blockchain by financial institutions such as China Construction Bank / Societe Generale and tokenization plans for rare and valuable assets represented by INX’s Diamond Standard Coin.
Digital assets have absolute scarcity, as represented by Bitcoin, and are gaining great support from the perspective of inflation hedging at the present time when the value of legal tender is being depreciated due to quantitative easing. In fact, Venezuela has allowed Bitcoin to be used to buy Pizza Hut pizza. PayPal has also built a mechanism to automatically convert Bitcoin to legal tender as a payment method and make payments. PayPal has plans to solve the issue of digital asset volatility and allow stores to record sales in fiat currencies instead of Bitcoin. (Currently, withdrawal restrictions are applied)
Security tokens enable the digitization of assets in a legally compliant manner. Even when blockchain is used to issue securities at financial institutions, it is conceptually considered to form an ecosystem as the digitization of securities. It is expected that various cases will be created in the future, such as not only STO = financing but also trading of private placement securities on the security token exchange by direct listing. Security tokens will facilitate mutual development of digital assets and private placement markets.