Why invest in Security Tokens?
I’ve thought about it quite a lot — from a bit different angle than most. My angle has been why would an American investor be interested in the European security token or why would an Asian investor be interested in American security tokens, and other similar transcontinental combinations. Why would an investor want to give money to a company on another continent? What makes the investor take out the wallet, pull out 2000 dollars and invest it into a far-away project they don’t’ have any connection to. Most of these companies are not household names like Apples or Googles, which attract investors from every corner of the world. Some crypto ideologists claim that people invest simply because they have access. Well, people have access to the stock market as well. Not many people are using it. Then the ideologists bring out the ICO claim — that retail investors invested billions into ICOs because they had access, and they will invest into STOs the same way. Retail investors did invest in ICOs, but they were not interested in investing because they had access. They invested because they wanted to make 1000x profits the next day. Security tokens are not as speculative, and they don’t attract the investors for the same reasons.
That said, the ease of access is an important factor why ICOs raised crazy amounts of capital, and it’s one of the fundamental positives for STOs as well. Access to venture-funded high-growth companies, more precisely. Tokenization makes it possible to have access to these companies, and these are the companies that provide the greatest returns to early-stage investors (in the shortest time-frame). Why would these companies tokenize company equity? It’s a good opportunity for the founders of the startups, as it gives them a chance to have some liquidity through selling tokens. Today, founder shares can be locked for 10 years, and although millionaires on paper, in reality, they don’t have much liquid capital. Having liquid capital would provide more possibilities for these capable entrepreneurs to start more successful companies, resulting in more jobs and a stronger economy.
As to why an American investor would be interested in the European security token, then obviously it will come down to the company issuing the tokens. If the company shows a lot of promise with a great team and technology, then I don’t see why the American investor would not want to be part of that. I guess it’s not very common for Americans to invest abroad, but it’s common for Europeans to hold shares of US-based companies like Apple or Facebook, and the same applies to Asian investors. Aforementioned companies are household names, true, but there are plenty of other US-based companies which shares are held by foreign investors.
I had a discussion about it with an American securities lawyer. We were discussing legal requirements of listing European companies in American trading venues. At least that was the plan. We didn’t quite get to that, as the US lawyer asked me why would an American investor be interested in the European token. The question got me a bit off guard and I did not have a very good answer at the time, and perhaps I still don’t, but I would say it’s an American perspective as they tend to be more US-centered. Rightfully so, as the US market has provided great investment opportunities and companies for many decades now. For European investors, it’s a standard to be interested in companies of other continents as well. And American companies want their tokens to be liquid and tradable in Europe and Asia.
Look at“traditional” cryptocurrencies. I hold cryptocurrencies of the companies which are based in Germany, the US, China, Japan and Israel. A similar geographically diversified portfolio is held by my network of people, including the US residents. It’s about the concrete business opportunity, technology and team behind the project, not the location.
And why to invest in the first place (in any asset class)? It’s not like the pension systems are thriving and we have our material futures insured. It’s just common sense, and security tokens will simplify investing and provide access to companies which have a potential for great returns in time.
TokenizEU is a security token issuance platform managed by Comistar. We help to structure security token offerings and comply with the regulations in the European Union, as well as issue tokens and enable investors to participate in the offerings. To enable non-EU residents to participate in the offerings, we support creating SPVs (special purpose vehicle) in the European Union through Estonian e-residency program.