What Is Stopping People From Investing In STOs?
By ROKKEX on Altcoin Academy
With the ungraceful fall of ICOs came the rise of promising STOs. However, the Security Token market report says that only 51% of STOs ended successfully. The question is, if STO is the better version of crowdfunding and has so much potential, what is stopping people from investing?
If we look at the ICO market report, we will see that the success rate is poor (33% in Q1 of 2019). Though, ICOs are collecting way more money than STO even after the reports of 80% of ICOs in 2017 being scams or fraudulent in some way.
Funds raised through ICO (source):
Q1 2019 — $902 065 155 (avg. $8 430 515)
Q4 2018 — $1 416 534 617 (avg. $6 843 162)
While out of 76 STOs (27 already closed) the total amount raised was $246 537 770 (avg. $3 521 988). The biggest STO so far was tZERO (a subsidiary of eCommerce giant overstock.com) managed to raise $134 800 000 back in Q3 2018. (source)
Stocheck.com conducted a survey earlier this year (May 23–31 of 2019) on more than 50 Telegram groups asking ‘What is holding you back to invest in an STO?’. We ran it on our ROKKEX Official Chat too. Positively, many of the participants were already investing in STOs. However, there were plenty of reasons why people chose to hold on investing. We can separate those reasons into a few groups:
- Lack of high-quality projects
- Lack of knowledge
- Lack of trust
Lack of High-Quality Projects
According to Polymath, more than 100 security tokens have been created so far. But they are not liquid. Their volumes are tiny, and most tokens are not even listed for trading. It is all due to the fact that many projects do not follow the needed regulations, which include proper KYC and AML procedures and required licenses. Many security tokens that could offer global liquidity are still in regulatory lock-up in various countries. Experts noted that many of the first STOs were more of rebranded ICOs than actual STOs.
However, Lewis Fellas, a Co-Founder and Chief Investment Officer at bletchley.com, offered a more positive look at the STO market:
It’s still early, but we’re moving in the right direction to liberalize capital markets but also provide investors with a real value proposition.
Lack of Knowledge
People are lacking knowledge on both the STO technology and investing itself. There would be more potential investors if projects and the market itself would offer the helping hand and lead the investor with clear explanations of how it all works. To be honest, this lack of knowledge both when it comes to STOs and crypto, was our primary reason why we decided to focus on writing educational articles, such as:
- STO Meaning: 10 FAQ
- What Are Security Tokens?
- How To Evaluate STO: Factors To Consider?
- What Is The Difference Between IPO, ICO, IEO, And STO?
Many people do not even understand or care to understand that ICO and STO are different. Of course, they do see that investing in regulated STOs is more complicated than investing in ICOs. That might even stop the ones that were going to invest but did not want to be bothered with the longer process. However, the time that you will spend on KYC procedures is a pretty reasonable price for getting reassurance that you are not being scammed right now.
As Arianna Simpson, VC & MD @ Autonomous Partners, said:
Institutional investors are still getting accustomed to the idea of tokenized ownership of assets, and my sense is that while we will eventually see this become a large market.
Lack of Trust
Yes, lack of trust is closely related to the lack of knowledge. But we already knew that there was a lack of faith in cryptocurrency since it was created. Also, the shadow of fraudulent ICOs damaged the trust of the community that already believed in crypto. It built somewhat of a wall for Security Token Offerings.
You could think that licensed projects that are following regulations, being transparent, and protecting investors should not be called bogus. However, people might still need some time to heal and calm down to regain their trust and willingness to try again. The STO market needs some time to develop and grow too. Many experts are talking about 2019 being the build-up year for STO’s success.
We at ROKKEX believe in the bright future of STO market. In fact, we want to build our own Securities Exchange platform that will improve the accessibility of security tokens and their liquidity. As might be expected, we chose to fund this project through an STO. If you would like to join us and invest but have some questions, feel free to contact us on social media, check our white paper, and read our ROKKEX STO FAQ.
At ROKKEX, we take security extremely seriously, and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise :)
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