The Japanese STO market is a unique ecosystem with great potential.
In the STO market, a decrease in trading volume in the secondary market has been confirmed, while use cases are being created in Japan as a method of raising funds in compliance with laws and regulations.
The difference from conventional investment products is that the minimum investment amount is easy for general investors to participate in, and it is considered to be highly transparent in Japan. For example, security tokens designed like new REITs (real estate investment trusts) that “visualize” the risk of rent reduction in portfolio real estate will become widespread. This will help meet investor needs that have not been covered before.
Yields are also expected to improve by reducing securitization costs using digital technology. As each securities company develops and provides attractive investment products, it is expected in Japan to pursue new possibilities that could not be achieved by the conventional market structure. In a similar case, the US security token issuing platform Vertalo has announced plans to tokenize real estate and bourbon whiskey. They have succeeded in continuously acquiring customers by providing platforms to each company, and the ecosystem is expanding due to the development of the primary market (issuing market).
Security tokens are expected to be developed as investment products that meet the “essential needs of investors” that have not been fully met. In Japan, cases of STO focusing on solving social issues have also been confirmed. In 2020, the market capitalization of the entire STO market exceeded $ 500 million against the backdrop of an increase in the trading volume of the security token “OSTKO” backed by OverStock’s preferred stock. While large companies are expected to participate in the market, the stock market as a whole has strong implications as a relatively small emerging market. As trading volume continues to decline, it will be necessary to maintain continuous market function in the future.
From the perspective of the size of the STO market, there is also a view that it is difficult to expand the fee business due to the increase in users in the secondary market. It can be said that the realistic market outlook is how well a handful of companies can survive as the selection of entrants progresses. Under such circumstances, in Japan, SBI e-Sports, a subsidiary of SBI Holdings, raised funds with security tokens, and a major securities company is forming a market.
The Japanese STO market has a unique ecosystem with great potential in that securities companies with abundant knowledge and experience cultivated so far are participating. The market strategies of companies such as Securitize Japan, BOOSTRY, and LayerX have been reported, and it is expected that the awareness of investors will increase as social interest grows.