BlocDesk (BD) was recently given a unique opportunity to conduct an interview with Herwig Konings (HK), CEO & Founding Partner of Security Token Group.
Unlike cryptocurrencies, security tokens are a fully regulated industry. Several companies and projects have issued security tokens to provide benefits to investors.
Security Token Group spans three ventures: Security Token Advisors, Security Token market, and Security Token Capital. Together with Herwig Konings, we discuss the current landscape for STOs, as well as what the future may have to offer for this industry.
BD: As a company, Security Token Group encomapsses a wide range of services. What has the overall response been to security tokens in the United States so far?
HK: Security tokens actually first originated in the United States and now has become a global phenomenon. It started in the US because of the strict regulatory activity around ICOs in 2017 which created a clear message, a dedicated infrastructure needs to be created for tokenized securities and assets. Now we’ve seen the SEC approve registered offerings and IPOs for security tokens and institutional issuers like FAT Brands and Overstock issue security tokens. On the secondary market side, we saw last month’s trading volume rise over double to over $20,000,000 in trading volume, a significant amount compared to last year but likely just a glimpse as to what is coming!
BD: One of your ventures – Security Token Advisors – provides STO consulting. What are some of the common questions and concerns you help clients to overcome?
HK: The biggest challenge is always educational. We’re talking about the digitization of your stock or your investors, if you will. This brings in a lot of new capabilities but also new procedures and technologies that we help our clients understand and apply successfully. This space is constantly evolving and improving so it pays to have experts on hand.
Security Token Advisors strives to provide the expertise and perspective for issuers seeking to tokenize an asset. This process requires third party tech providers, legal opinion, and other financial services, each needing different levels of input and coordination. Through our consulting company, we manage this process alongside the issuer, allowing for a simpler and more efficient path to liquidity.
BD: Given the recent surge in overall trading volume for STO tokens – as tracked by your STOMarket platform – do you expect more trading to occur, and if so, what will be the catalysts bringing more investors to this space?
HK: Absolutely! The reality is that more security tokens are getting listed and more people are becoming aware of the opportunity to invest in security tokens. These trends will eventually turn exponential as we are already starting to see! This is thanks to the fact that there are hundreds of trillions of dollars worth of assets, debt, and securities around the world that will inevitably get tokenized.
This thesis is proven each successive month, with interest in tokenized offerings skyrocketing, which can be measured in trading volume. Through the year in 2020, we’ve seen a 112x (120,000%) increase in monthly volume! It’s clear that global access to high-quality offerings is the main catalyst for successive growth. International investors now have the ability to purchase investment assets never before possible, and even retail US investors are seeing opportunities to invest in private companies that they were previously excluded from participating in. Tack on the increased quality of assets including real estate and other real world assets, and it looks like the industry has found a winning combination!
BD: One of the more recent STOs to launch is linked to the renowned St. Aspen resort. Do you think we will see more real-estate based tokens in the future? If so, which (types of) locations could be a good fit, in your personal opinion?
HK: We’re going to see real estate as a leading asset type in the security token space because of the many benefits smart contracts and digitization brings to the table. We’ve already seen over two million dollars worth of properties in Detroit get tokenized by RealT and many other real estate security token projects and platforms are launching around the world. We actually just covered real estate on Episode 58 of our podcast, the Security Token Show if you want to learn more about that.
BD: Certain restrictions may prevent investors from being accredited to partake in the STO industry. Is there a way to lower the barrier to entry without opening the floodgates too much?
HK: Unfortunately, most STOs are private offerings and are restricted to accredited investors. However, this does not limit everyday Americans from participating. STOs raising money can use exemptions like Regulation Crowdfunding to raise up to $1,070,000 from anyone and trading can be opened up to anyone through Rule 144, which is how tZERO (TZROP) and the St. Regis (ASPD) are available to invest in by anyone today. We can also expect more public offerings like Arca (ArCoin) and Overstock (OSTKO) to also trade as security tokens, which are already open to all because they are registered with the SEC. Exchanges and secondary markets for security tokens will open up these opportunities to everyone and the floodgates will eventually open!
BD: Compliance and regulation have been detrimental to security token offerings. Most countries in the world have no active or completed regulatory framework yet. Will this situation change in the next 18 months, and if so, which countries could lead the charge?
HK: Actually, Security Token Advisors just released a report stating that over 15 countries have already established security token frameworks and over 50 already support them under current regulations. We believe this is a growing trend because there is a clear benefit in defining security tokens in order to promote a regulatory framework for them. We’re seeing countries like Germany, Japan, and Singapore lead the charge in this regard.
BD: If you could create one thing – physical or otherwise – that has the power to take security tokens to the next level, what would it be, and why?
HK: We are already creating it – it’s called Security Token Group! Our very mission is to take security tokens to the next level and to support the amazing industry of entrepreneurs developing the next generation of capital markets. Stay tuned through LinkedIn, Twitter, and our Medium Blog for more announcements next month on some additional ways we plan to foster adoption for the technology!