The market for tokenized securities (STO) is lifeless: current offers suffer from poor liquidity and inadequate information disclosure, which reduces demand from investors.
This opinion was expressed by the founder of Aboveboard Andy Singleton. In the article "The real STO market outlook: near death" he states that, despite "a team of non-existent startups," who "announce infrastructure and publish transactions for sale, no one actually buys them."
Singleton argues that the offer of tokens is a synonym for bad investments from the point of view of potential buyers, because the proposals do not have sufficient liquidity, but usually require substantial fees.
"The non-tokenized private security market absorbs about $50B a DAY in new supply, proving that there is a massive base of buyers for desirable securities," says the founder of Aboveboard. "The tokenized security market attracts approximately zero percent of that demand."
Singleton states that offers of tokens are not intended to trade with a significant amount and that issuers do not "disclose enough information to allow the buyer to determine a fair price."
"Funds like Bcap and SpiceVC can only be purchased by US investors under special circumstances, if they accept US accredited investors, they can only have 100 shareholders. They may create PFIC tax liabilities … And, they are tiny issues — under $20M in total float. The problem is not just that the market is early and it will grow. These securities are fundamentally not designed in a way that will allow much trading at any point in the future," said Singleton.
In addition, he claims that many unregulated primary tokens (ICOs) have attempted to "remarry" their fundraising proposals as "equity securities" after intensifying actions taken against ICO.
Despite the criticism of the STO market, Singleton recognizes it as an important technological innovation related to the securities industry, emphasizing the ability to receive royalties in real time and to vote using security tokens.
"Putting an existing security into a blockchain wrapper doesn't add much value to that security. The market will really take off when we see new types of deals and business models that require the flexibility of the tokenized format … Bitcoin is valuable because it did something completely new — it monetized and coordinated the efforts of an open source community," he concluded.