ICOs have become very common that they no longer get funding as fast as they would hope. This has forced crypto contributors to look for alternative ways to get involved in the business. Coins are now more attractive since the liquidity has been on the rise compared to the ICOs whose liquidity is falling. There are indeed many tokens that you can find in the market today. They include:
- Security tokens
- Utility tokens
- Voucher tokens
Each of these has different value and functions in the market. The security tokens are for instance simply referred to as tokens. They are the most common especially for investors. As with other kinds of crypto assets though, there are no licenses yet and companies are reluctant to register their prospectus. As for utility tokens, they are the equivalent of cash in the digital ecosystem. They are used to pay for other items. Voucher tokens, on the other hand, work like rewards for the various programs that are carried out in the digital crypto world.
Utility tokens are the most used when it comes to raw popularity. They are sold without any KYC/AML compliance and thus this makes them more accessible. Crypto regulations laws are changing though. Regulators are now categorizing all crypto tokens as securities. This had led to the rise of crowdfunding efforts around the world. Due to the high costs, the issues of crypto fundraising and regulation have merged.
Regulation is however quite complicated. Securities, coins, and vouchers all feature different regulatory regimes. Financial regulators are yet to have a unified system where all factors in the crypto world are considered. The big issue currently, therefore, is whether the different items like e-money and tokens should be regulated in the same way. There is indeed a risky situation that regulators are avoiding by trying to use one system to regulate all crypto assets.
Securities are Considered First
In the regulation world, securities are at the top of the list for crypto regulators. Bodies like the US SEC use their jurisdiction to determine whether an asset is a security or not. If it is not, then it might not receive much attention in regulatory terms. Securities issued at primary markets should meet the placement rules while those that are issued at secondary markets must be traded at registered platforms. Intermediaries, on the other hand, must comply with KYC/AML rules.
Indeed, every kind of token has its place in the market. Utility tokens are needed just as security tokens. There is a wide spectrum of use that necessitates the existence of each kind of token. As for ICOs, there are a number of issues that create demand and supply forces. These issues are:
- The rise of new tech and startups
- The essence of trade for profit-making
- Investment opportunities by startup companies
The ICO market relies heavily on the trade and liquidity that exists in the market. Every token raised is definitely down to the fiat availability of tokens. Without private securities, therefore, it would be difficult to fund any new startups and this would ultimately affect technology and business. There are a number of firms that are trying to bring all the different crypto worlds together. The goal is to have tokenized securities that can also be tradeable. By having such tokens, the challenge of having to deal with different regulatory regimes and market problems would be reduced.
Regulation is Inevitable and so are Tokenized Securities
As the years progress, it has become clear that regulation would not only do good for the crypto market but it would also protect it from going under. New ICO regulations are set to be introduced in various markets especially the US and the UK. The introduction of tokenized securities will prove to be impactful for the capital markets. Blockchain-based platforms will continue to rise as ICOs decline. Since digital assets are also expected to grow, it will be inevitable to have a system where regulation and growth go hand in hand.
Crypto investors are still very skeptical about the liquidity and usability of utility tokens. The many different protocols that are being developed to make tokenized securities the go-to option are however proving to be worthwhile. The crypto market will unavoidably evolve rapidly in the next few years and tokenized investing will be in the middle of the new growth.