The global security token offering (STO) ecosystem saw many significant developments throughout 2019, particularly from regulators in large economies who have actively adopted blockchain. However, security tokens were mainly traded by “elite” investors.
Many highly developed countries and their financial regulators across the globe indicated greater acceptance of security tokens last year. In the UK, the Financial Conduct Authority (FCA) published final guidance on cryptocurrencies and tokenized assets, saying security tokens fall under its regulatory scope. The FCA also created regulatory sandboxes to facilitate the country’s security token ecosystem.
In the US, the state of Maryland passed a bill allowing the use of blockchain to record stock issuance, transfer, and management. The US Securities and Exchange Commission (SEC) approved two Reg A+ token offerings: Blockstack and the Props Project.
In Asia, China issued almost US$3 billion worth of bonds via blockchain, while Singapore-based security token platform iSTOX completed what it says is “the world’s first issuance, custody and trading of regulated blockchain-based security on a single integrated platform.”
The fact that demand for STOs is still limited to accredited investors has raised concerns among other investors and regulators alike. According to the SEC, one must have a net worth of at least US$1 million or at least US$200,000 annual income to be considered an accredited investor.
Bruce Fenton, CEO of Watchdog Capital, recently noted that the criteria for an accredited investor strictly depends on wealth.
The SEC is currently considering a change to who is allowed to invest in regulated securities offering by making the definition of an accredited investor more inclusive. If the definition is amended, many more eligible investors are expected to participate in STOs.
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