Opinion: Securities Tokens Are So 2019
Ever since US Securities and Exchange Commission Chairman Jay Clayton stated that he has never met a utility token that was not a security, initial coin offerings in the US have all but evaporated.
Since then, a day has not gone by without someone announcing on securities token offering rather than an ICO. However, the secondary market for securities tokens has not yet appeared, which has left many investors questioning the real value of their digital investments.
The good news is that it is only a matter of time before the securities-token secondary market ramps up. Investors should expect to see the nascent secondary market kick off in the second half of next year.
Securities tokens may seem to be a new invention, but the SEC treats them as private securities under its regulations. Many STO backers typically follow the requirements of the SEC’s Regulation D to access US-based investors. Although, in theory, they also could follow Regulation A+ or Regulation Crowdfunding instead.
As a private security under Regulation D, initial investors have a 12-month lock-up period and then can trade their securities on a registered exchange or alternative trading system.
For those who read their teas leaves well, followed Regulation D, and issued their STO when Chairman Clayton made his first official statement on cryptocurrencies and ICOs on December 11, 2017, their lock-up period will end only in a couple of weeks.
The STO backers who waited until after the now-famous June speech made by William Hillman, the SEC’s director of the Division of Corporate Finance, on the possible future of digital assets, will not see the end of their lock-up periods until mid-2019 at the earliest.
In the meantime, Wall Street should expect to see an increasing number of crypto exchanges partnering with registered exchanges, such as Tzero and the Boston Stock Exchange, or acquiring broker-dealers for their ATS platforms like Coinbase and uphold have done with there respective acquisitions of Keystone Capital and JNK Securities.
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