Home » Capture the industry? Token IPOs target a $ 200T global capital market

Capture the industry? Token IPOs target a $ 200T global capital market

In early May, INX Limited, a Gibraltar-based blockchain trading platform, announced the completion of its INX token selling event, which took place through an initial public offering. The event marked the first time the U.S. Stock Exchange and Securities Commission has approved a cryptocurrency IPO.

The SEC has been consistent in characterizing most cryptographic assets as securities. In fact, this stance has been at the forefront of the commission’s campaign against new companies that issued digital assets during the initial 2017 and 2018 currency bidding craze.

Since then, offerings of regulated security tokens, or STOs, have been hailed as the next big news for token-based fundraising, and ICOs consider them an anathema to many financial regulators around the world. In fact, authorities in several countries have created legal frameworks for regulated capital raising activities through digital asset tokens.

Token INX $ 125 million OPI

As Cointelegraph reported earlier, INX announced on May 3 that it had completed its initial $ 125 million SEC-approved token offering. The news marked the end of the innovative token bidding process, which began in August 2020.

At the time, the company was reportedly seeking to raise $ 117 million through an SEC-approved STO. In the end, the blockchain trading team surpassed its initial target by more than $ 8 million, with more than 7,200 retail and institutional investors participating in the initial public offering of digital tokens.

The IPO of real public tokens raised about $ 85 million, in addition to the $ 7.5 million obtained during the private sale and another $ 32.2 million from a private equity placement in the Toronto Stock Exchange. INX is reportedly going to use the funds raised to establish its trading platform planned for security and encryption tokens.

In fact, INX is reportedly anticipating a situation where its platform acts as a trading partner for U.S. companies seeking to raise funds through STO. Therefore, in addition to providing business services for digital assets, the planned INX exchange will also allow customers to issue and sell security tokens.

In a note to Cointelegraph, Shy Datika, co-founder of INX, revealed that the company already had 30 signatures in the process waiting to launch its own security tokens once its trading platform goes live. According to Datika, the adoption of digital assets is gaining ground among institutional investors.

INX’s symbolic initial public offering is also likely to provide first-hand proof that digital currencies are viable for capital formation. As part of its announcement in early May, the blockchain trading company revealed that half of the funds raised during the initial symbolic public offering came from cryptocurrencies in Bitcoin (BTC), Ether (ETH) and currency. stable USD Coin (USDC).

In fact, INX attributed part of the IPO’s success to the fact that both retail and institutional investors in 75 countries around the world could participate through cryptocurrencies despite the “blue sky restrictions”: laws statewide anti-fraud in the US. UU. They usually come into play for issuers of securities with international subscribers.

In fact, INX reported at the time that more than 61,000 investors expressed interest in the symbolic initial public offering, but were unable to invest due to the aforementioned limitations.

Digital values ​​at the heart of the new capital market

The global capital market, estimated at about $ 200 trillion, is often considered ripe for the disruption of digital and blockchain currency. From decentralized finance, also known as Defi, primitives working toward access ramps to interact with real-world assets to legacy financial institutions that revolve around adapting new technology to their existing protocols , the digitization of the stock market seems to be on the agenda of many stakeholders.

Datika has also alluded to this emerging trend when it announced the completion of the symbolic initial public offering, even highlighting the trend as an important part of the company’s ambitions. At the time, the INX executive commented that the company envisioned a new paradigm it called “Capital Markets 2.0,” where digital stocks replace stocks as vehicles for raising capital.

According to Datika, digital currency exchanges will occupy a central place in this new paradigm as financial assets turn to blockchain technology. Commenting on the potential of digital and blockchain currencies to make a significant dent in the global capital market, Douglas Borthwick, commercial director of INX, told Cointelegraph:

“Global Capital Markets are currently stagnant in a time distortion. Let’s take the American equities as an example. They are open 5 days a week from 9.30 am to 4 pm. Meanwhile, digital stocks are trading 24 hours a day. day, 7 days a week, 365 days a year U.S. equities require a transfer agent, while digital securities are liquidated in the immutably owned blockchain. can be used as a money laundering tool.Digital assets can be built with standalone KYC [Know Your Customer] and AML [Anti-Money Laundering] through the whitelist in the blockchain «.

However, lack of liquidity remains a major issue that needs to be addressed before value tokens can have a significant weight to support forays into the global capital market. For Jenny Q. Ta, CEO of the blockchain trading platform CoinLinked, the solution to this problem is to have more security tokens on the market. In a conversation with Cointelegraph, the Wall Street veteran commented:

“Not only do we need the amount of security tokens on the market, but it’s also crucial to have quality tokens. Definitely, the space needs a lot more security tokens to be included in the liquidity list not just in the US. But globally, so realistically, it will take some time. ”

Therefore, given that liquidity is a major bottleneck for STOs, it may not be surprising to see a rebound in such bids in recent times. This trend has also been encouraged by a number of favorable regulations in major economic jurisdictions in Asia and Europe, and regulators apparently agree to token offerings, as long as issuers follow established regulatory provisions.

In December 2020, the SEC stated that security token stockbrokers will enjoy a five-year compliance action fair. In Germany, financial regulators officially recognized digitized securities, and Swiss authorities are introducing full-spectrum cryptographic regulations covering various aspects of the market, including STOs.

Highlights of STO from around the world

Progress in this area is not limited to the borders of the United States. In April, Japanese financial giant SBI launched its first retail STO in Japan: corporate bonds issued by SBI Securities. The event demonstrated the ability of blockchain-based systems to replace the usual central securities depository infrastructure required for securities issuance.

SBI’s retail STO is also a testament to Japan’s somewhat mature cryptocurrency and blockchain laws that possibly provide a set of strict but clear rules for participants. The country even has its own self-regulatory organization for STO matters, the Japan Token Offer Association.

However, the April STO was not SBI’s first foray into the arena. In October 2020, the Japanese financial conglomerate announced plans to allocate symbolic security shares to SBI e-Sports, the company’s sports gaming subsidiary.

In March, Canadian blockchain technology company Blockstream launched a security token linked to the company’s Bitcoin mining operations. In addition to offering exposure to Bitcoin mining stocks, the Blockstream Mining Note security token also grants ownership of the extracted BTC after a three-year allotment period.

Blockstream’s security testimony shows that STOs can even be a pathway to direct ownership of digital currency for investors.

Other recent STO issuers include supersport maker Mazzanti Automobili and Japanese bank Sumitomo Mitsui, which partnered with SEC Securitize’s registered digital securities issuance platform to launch what it said was the first security witness of Japan that complies with the country’s Exchange and Financial Instruments Act.

European banking giant Société Générale also took its impetus for blockchain adoption beyond the issuance of digital bonds by launching its first security token in April. The bank chose Tezos as the preferred blockchain.

At the time, Jean-Marc Stenger, director of the bank’s financial technology subsidiary Forge, told Cointelegraph that Societe Generale’s security token efforts were independent of the blockchain. In fact, Stenger added that the company plans to use between three and five public networks for issuing security tokens.

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