Top 10 Most Influential Markets for Security Token Offerings

SMC Capital
Dec 22, 2018 · 9 min read

With their promise to bridge cryptocurrencies and traditional finance, security tokens are picking up steam in the digital assets community. Tens of millions of dollars of assets have already been tokenized, including a $30 million luxury residential project right in the heart of Manhattan, $1.7 million in shares of an Andy Warhol painting, and $15 million in shares of Singapore-based venture capital firm SPiCE VC.

Security token offerings (STOs) enable the tokenization of different asset classes, such as real estate, company stocks, and even artwork. They promise to deliver a lower cost and a simpler fundraising model compared to initial public offerings (IPOs) while maintaining full legal compliance with regulators. Security token holders can enjoy round the clock liquidity opportunities with the ability to trade their holdings on secondary exchanges while also enjoying the added transparency provided by blockchain ledgers. Just like their predecessor, initial coin offerings (ICOs), STOs can also give companies the ability to raise funds without giving away any equity in the company itself.

With up to $7.7 trillion up for grabs, the STO market has enormous potential, but every one of the seven largest crypto markets seems to have its own unique approach to STOs.


The United States has taken the driver seat in setting up a legal and financial framework for the STO industry. Securities tokens promise a high level of protection to investors, and the US Securities and Exchange Commission (SEC) has provided some regulatory cover for STOs issued in the US, including SEC filing exemptions via Regulations A+, D, and S. These exemptions allow STO projects to raise funds from accredited investors in full compliance with US law while also granting certain benefits that lower cost and speed up the process.

The SEC’s cautious green light for fully compliant token offerings has enabled a wide range of American companies to emerge and fill various roles in this market. STO programming and issuance platforms, such as Harbor, Securitize, Polymath, Swarm, AirSwap, and Securrency, help many different types of projects tokenize assets and issue their own tokens. Exchanges and Alternative Trading Systems (ATS) dedicated to security tokens have also emerged, such as tZero, OpenFinance Network, SharesPost, Orderbook, and Templum. Larger players, such as Coinbase and Circle, are also aiming to launch their own security token services.

Some notable STO milestones have already been achieved in the US market. Apart from the $30 million deal mentioned earlier, Harbor also recently tokenized a $20 million mega-dorm in South Carolina. Tokens from Polymath and AirSwap have also been listed on IDCM, one of the 20 largest crypto exchanges in the world. A slew of US dollar stablecoins have been issued in the US, including Tether (USDT), USD Coin (USDC), Gemini Dollar (GUSD), Trust USD (TUSD), and StableUSD (USDS).

STOs in the US are being conducted across a range of industries, including a profit-sharing STO from, an STO backed by revenues from farming activities called Producer Token, and a project called Soluna that seeks to deliver returns from cryptocurrency mining powered by a 900 MW wind turbine farm. Two major broker-dealers facilitate STO promotion to accredited investors — enToro with their OfferBoard platform and TokenSoft.

The US STO market is growing by leaps and bounds, showing great potential for development and mass adoption. With a favorable regulatory approach as well as plenty of companies, exchanges, and investors in the space, the US looks set to take center stage in the emerging STO market.


The Chinese government reacted to STOs in the same way that they reacted to ICOs in September 2017 — by announcing an outright ban. Hong Kong has proven to be an exclusion to the rule, with Hong Kong’s Securities and Futures Commission (SFC) announcing a regulatory sandbox for security token projects and exchanges.

The world’s top three exchanges, Huobi, Binance, and OKEx, all have origins in China. All three are exploring various ways to allow listing and trading of security tokens. Bibox, the seventh largest exchange, revealed to SMC Capital that it plans to seek a license to operate in the regulatory sandbox. Hong Kong-based IDCM, the 20th largest exchange, has announced a new STO issuance and trading platform and has already listed several STOs for trading on its new STO board. Some Chinese companies have also emerged as STO issuance and infrastructure providers, such as everiToken.

Although the regulatory environment creates challenges and sends mixed signals to companies and investors, China has some of the largest cryptocurrency exchanges and digital currency projects in the world, so the potential for STOs in China is also huge. However, investors should proceed with caution due to the regulatory uncertainty.

European Union

A unified, EU-wide regulatory approach to security tokens has yet to take shape, but many individual EU countries have already established national frameworks to regulate STOs. The European Securities and Market Authority (ESMA) has provided wiggle room for STO projects to conduct financing on EU territory with certain stipulations, including submission of an investor prospectus that complies with standards set out by law.

Both Gibraltar and Malta, two small EU jurisdictions, have emerged as frontrunners in the EU security token space. Gibraltar’s GBX exchange helps security token projects issue tokens and lists qualified tokens on their exchange. Both OKEx and Binance are launching security token exchanges in Malta, joining home-grown players like MDX. Other EU countries offering a favorable environment for STO projects include Lithuania, Austria, Estonia, and Cyprus. Projects approved to conduct STOs in the EU include Desico, finbc, and BatteryStorage.

The European Union offers many different jurisdictions for securities token issuance and trading as well as robust and accommodating regulations, making this an attractive market for STO projects.


Thailand has emerged as a very promising potential hub for STO issuance and trading in Asia. The Thai Securities and Exchange Commission (Thai SEC) is looking at different legal frameworks to regulate That STOs.

The Thai market has already seen some important traction in the STO market. US-based real estate investment company Elevated Returns and Securitize purchased a 24.9 percent stake in Semico, acquiring Thai broker-dealer license that would enable the companies to issue their own STOs in Thailand. Thai cryptocurrency exchange Satang aims to raise $10 million in a security token offering.

Regulation in Thailand toward STOs is still unclear, but there appears to be positive momentum.


Blockchain-friendly Singapore is also looking to get in on the security token action. Singaporean regulator Monetary Authority of Singapore (MAS) partnered with the Singapore Exchange (SGX) to launch an STO settlement platform called iSTOX. Government-owned venture fund Temasek is planning to launch an STO through iSTOX.

Singapore-based SPiCE VC became the first-ever hedge fund to tokenize its returns, giving token holders a share of net profits. In its STO, SPiCE VC raised $15 million, which the firm went on to invest into seven different tech companies. The SPiCE VC token was recently listed on OFN.

The tiny nation of Singapore does not appear to be far behind the US and EU in creating a framework to allow the Singaporean STO market to flourish.


Switzerland’s Financial Market Supervisory Authority (FINMA) has authorized Swiss-registered fintech companies to hold up to $100 million in deposits from fundraising. SIX digital exchange plans to roll out security token services in the first half of 2019. Tokenestate has announced that it conducted the first digital share transaction on an Ethereum blockchain using Swiss francs while maintaining full compliance with Swiss laws.

Projects approved to conduct STOs in Switzerland include WISeCoin, SwissRealCoin, and BlueOcean Ventures. Switzerland’s legal system appears to support STOs while the country also features a crypto-friendly tech hub in the city of Zug. However, investors from other jurisdictions, especially the US, may face some difficulties in participating in Swiss STOs.


The Canadian Securities Administrators (CSA) announced a regulatory sandbox for fintech startups, including security token projects, offering “exemptive relief from requirements” for qualifying companies. The Canadian Securities Exchange (CSE) announced an STO platform in February 2018. Impak Coin became the first ever security token project to launch in Canada in September 2017, but other high-quality security token startups have since emerged on the Canadian market, including Kabuni, DigiMax, and Galaxa.

Canamex, a BC-based publicly traded company listed on the CSE, will release gold and silver-backed security tokens called GOLDUSA and SILVERUSA. The commodity-backed tokens are set to be listed on MDX. Westcan is planning an STO for a token backed by oil and gas revenues. Another Canadian company, Hyperion cryptocurrency exchange, is partnering with a project called Kinesis to launch stablecoins backed by precious metals.

While offering less variety than the US, Canada’s financial system, regulatory framework, and startup ecosystem all look ready to support STOs.


Like Thailand, Malaysia has emerged as a surprisingly active player in the STO space. Securities Commission Malaysia (SC), Malaysia’s securities regulator, and Bank Negara Malaysia (BNM), Malaysia’s central bank, released a joint statement in December announcing that “regulations are currently being put in place to bring digital assets within the remit of securities laws to promote fair and orderly trading and ensure investor protection.” Unlike China, the new legal framework encourages compliant token offerings.

Some notable projects have already begun to make use of this favorable approach to compliant digital assets offerings. United Overseas Bank Malaysia (UOB) has launched a security token called the UOB Mighty Secure, a token that helps its banking customers access their funds. Ho Wah Genting Group, a Malaysian travel and entertainment group, has launched a USD stablecoin backed by $500 million in assets called the HWG Cash, issued on everiToken. The new stablecoin will enable HWG Cash holders to pay for cruises, gambling, hotels, and goods at HWG convenience stores.

Malaysia is racking up STO use cases and establishing itself as an STO hub in the region.


Although Japan had high hopes to become a crypto hub, a series of hacks of major Japanese cryptocurrency companies led to the theft of $540 million worth of crypto from Japan in 2018, forcing regulators to actively intervene into the space. The Financial Services Agency (FSA), Japan’s leading securities regulator, announced at the beginning of December that Japanese token offerings would be obliged to register with the FSA, paving the way for legally compliant offerings.

A Japanese consultancy called Platinum helps Japanese companies issue STOs in compliance with the FSA, including required documentation. Asobi Coin, one of Japan’s first cryptocurrency payment systems, conducted their token offering in compliance with regulators.

Japan’s regulatory environment still remains uncertain and few STOs have been conducted on Japanese territory. The FSA appears to have taken a cautious approach to security tokens and does not appear to be emerging as a regional leader.

United Kingdom

The UK’s Financial Conduct Authority (FCA) released a statement on ICOs back in 2017, vowing to review token offerings on a “case-by-case” basis. The FCA’s Cryptoassets Taskforce recommended that the sale of “complex, volatile and often leveraged derivative products” be prohibited to retail investors. However, the Taskforce did call security tokens a “specified investment,” a financial product regulated under British securities law.

A real estate STO issuance and brokerage platform called Smartlands has placed five real estate STOs in the UK, European, and US markets on offer. Wickwar & Co, a private British firm that has built custom despatch boxes for elite clients for 200 years, is planning an STO. DOVU has partnered with TokenMarket to conduct an STO. The London Block Exchange has partnered with AlphaPoint to announce the world’s first British Pound Sterling stablecoin. Several secondary exchange platforms have also emerged in the UK, including The Elephant and Funderbeam.

The FCA’s Cryptoassets Taskforce has helped to propose a path for security token offerings in the UK and many companies have already conducted STO activity on the back of a favorable STO regulatory framework in Great Britain.


Players from traditional finance all over the world have been eager to explore digital asset investment because of the potential for lower costs, greater liquidity, and higher efficiency, but have been wary to do so due to regulatory pressure. STOs provide a method for institutional investors to tap into the power of blockchain while maintaining full compliance with regulators. The blockchain community continues to recognize the legitimizing power of regulatory compliance and institutional trust.

Each market examined above takes its own approach to the emerging market for STOs, enabling the formation of robust communities of technology providers, exchanges, startups, investors, and legal services firms. Sound legal frameworks and high-quality projects will facilitate the convergence of blockchain technology and institutional capital, ensuring that the STO market can live up to its full potential.

SMC Capital

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NYC-based venture capital firm focused on blockchain infrastructure and security token offerings