Thread by @WarcMeinstein

0/ Issuing Security Tokens in 2019: Hype v. Reality. #sto #dso #TokenizeTheWorld #tokenize #smartsecurities #digitalsecurities

https://twitter.com/crypto_briefing/status/1084450669652783104

1/ Hype: Security tokens (#stos) reduce issuance costs vs. traditional private placement.

Reality: In 2019 issuing a security token costs as much if not more than a traditional private placement

In time & over the life of the ST this may prove true (still tbd)

2/ Hype: #STo reduce administrative friction

Reality: In 2019, ST issuance will add more legal & reg hurdles + new third parties to manage tech, investors, & custody

In time: Yes #sto will add automated compliance, disclosures & dividends + coded transfer restrictions

3/ Hype: #sto open issuers to new investor universe

Reality: In 2019, the #STo investor universe is limited. Most crypto investors are non-accredited. Institutions are sitting on the sidelines to avoid early tech & regulatory risk

Remains to be seen who drives demand

4/ Hype: #sto offer 24/7 trading & unbundling thus liquidity

Reality: Listed doesn’t mean liquid. Only 1 live #STo exchange with little to no volume.

In time: this might change, but due to product-market fit challenge above, it’s unclear

5/ More on above: @barrysilbert’s Second Market had trouble making liquid market for pre-ipo @Facebook shares. I expect series B sized issuers will face an even harder battle

6/ Hype: “if you build it they will come”

Reality: the launch of a #sto, does not mean a successful financial raise. Issuers still must spend months meeting investors to secure capital, often w/ support from a 3rd party broker dealer (further raising costs)

7/ In sum, prospective #STo issuers should understand challenges ahead of time. These are the early days & we are likely years away from real liquidity. Appropriately weighing costs/risks against benefits will lead to a healthier security token industry w/ better issuers. Fin