«The market is dead ICO», — said the head of the Digital Currency Group is Barry Silbert. With the opinion that the initial offer of coins no longer in demand, according to most members of the crypto community. Studies show the analytical Agency ICORating, crypto-startups have begun to practice a new method of raising money is STO, which stands for Security Token Offering and implies a location of the security tokens on the exchange.
Has received wide popularity in 2017 ICO is currently at the stage of diminished hype and the almost complete frustration on the part of investors. So, based on research conducted in ICORating, said chief analyst of the center Anastasia Denisova. She told about the results of the primary offer of coins for the first three quarters for the 2018 Event on the Crypto RIW.
Projects have reduced fees, now the size of the fall in the third quarter amounted to more than 70%. Moreover, as emphasized Denisov, the market falls not on the number of projects fraudsters are still trying to capitalize on the gullibility of investors, but according to their quality: for example, the average purchase request of the project now is $1−$5 billion.
«We analyze projects, provide reports to 30 pages at least and see that teams still want to deceive people, collect the money and disappear. That is, the crooks continue to lie, users continue to believe — so this self-contained story. All those who invested in the project in 2018, invest in a very risky idea», — said Denisov.
Also chief analyst ICORating told about the growing trend of flow of investment from Asian countries, and that the project has lost many important customers «profitable» U.S. and European markets and came to Russia.
«Now companies reverses on the Russian market, because users in the United States and other developed countries already don’t believe in ICO and don’t want to invest in a strange idea without competent technical documentation — and often teams represent only the prototype of their projects and not working on «iron» structure. Therefore new, often naive investors can be found in our country. Russian users are ready to invest in very high risk ideas that the hands of the organizers of the ICO,» — said Denisov, but added that more experienced players of the industry have an understanding of crypto-sphere. Consequently, those who entered the industry at least in the past year, calculate the risks and danger of deposits.
Important in the organization of ICO remains a regulatory issue. Jurisdiction countries ambiguously react to bitcoin and still not come to a definite conclusion on the definition of digital assets. In the second quarter, says Anastasia Denisova, mass and more simple crypto project lead Singapore, and in the third quarter of this country showed a negative trend in terms of quantity. So in the summer, the project moved to the Islands.
«This is not about comfort, but with the possibility of reducing the risks from regulators. Malta is now developing, although in the past it was not considered legally open for projects — at the moment there is a more clear background on the actions of regulators. And, for example, in Asia the story with regulation still murky. The important thing is that choosing the «easy» countries, the organizers of the ICO take risks and become even more invincible» — says the chief analyst ICORating.
In 2018, began the disappointment in ICO, as investors fall for scams that collected money and then «disappeared on vacation in the Islands». The project, conducted the primary placement of the coins was offered to the investors to participate in the fundraising campaign for the development of a startup, in return for the cryptocurrency bitcoin, ether, and utility-tokens — a means of gaining access to the product or service of the company. The main property of a utility-tokens is that they are not investing in the project. Users do not receive shares in the company and the related company law, as is the case with security tokens.
Due to the fact that utility-tokens does not cost any assets which would give them value, there are great difficulties with the regulation. In particular the SEC, the American securities Commission, which is now trying to control crypto industry, recognizes utility-tokens, because they are not securities. However, as we previously wrote in the journal DeCenter Magazine, the «right» utility, it’s rare.
According to the former Chairman of the Commission on trade commodity futures (CFTC) Gary Gensler, even the air and ripple can be considered as securities. In March, SEC Chairman J. Clayton also said that many of the tokens that have already drawn the attention of the Commission, were securities: «They offer a material interest in the project, in which the buyer ICO-token — call you this token or security — in fact says: «I invest in exchange for a promise of future income»».
For the reason that projects fail to abide by the rules of regulators, there is a new definition for domestic coins — security tokens, which have a attachment to the security. Security tokens provide asset, income and cash flow, so this type of coin has its own value.
So, based on the placement of security tokens, there STO — Security Token Offering. Essentially this process is similar to ICO, because after the release of tokens moving into the possession of the investor. However, in the case of STO investors send their money for the purpose of receiving dividends, financial flows or voting rights which, as an asset in Fiat industry, tied to security.
STO is, by definition, must fully comply with the legal norms. This allows investors from different countries to participate in the crypto project and not to violate the securities laws of their States. These requirements are very important for countries with strict regulation such as in the United States.
Co-founder Chainbits Nathan Rodriguez in his article says that an important aspect in STO is to allow companies to create lists of accredited — whitelist, and unscrupulous individuals — blacklist. It helps companies to meet the requirements of KYC and to combat money laundering, in particular, to combat money laundering, which is in ICO.
«The requirements on transparency of information in STO have a number of advantages: enhancing corporate responsibility, reducing risk of fraud and offer the protection of investors in case of bankruptcy of the company,» says Rodriguez, adding that at its core STO is more like an IPO.
Set in STO the rules create a real investment opportunity for institutional investors, which will provide large inflow of funds in the blockchain sector and to develop it more rapidly. Therefore, according to the chief analyst ICORating Anastasia Denisova, at the moment when the rate of the cryptocurrency is far from his best performance, STO seem interesting, but despite this have their drawbacks.
So according to Anastasia Denisova is possible to Express the investor’s attitude to STO. However, «nobody knows what is fraught with an attractive stranger-STO».
«Do not forget that the history of security tokens seems too low liquidity because there are a lot of problems with security exchanges. Their long promised to launch but the specific movements yet. In addition, cases when STO was successfully closed, you can count on the fingers of two hands. This is big examples of the type tZERO and other interesting projects related to travel industry. Now understanding investors, the queue that goes towards STO, there is virtually no», — said Denisov.
At the moment, the community that is interested in listing security token is waiting for the launch of the platform tZERO, a subsidiary of the retail giant Overstock. The firm has entered into a partnership with the operator of the Boston options exchange BOX Digital Markets LLC, which will create a trading platform for security-tokens. After starting attitude to security-tokens will probably change, but for now the situation remains uncertain-stable.