STOs are bad investments and they're failing, Andy Singleton says

21 Feb, 2019 | Updated: 21 Feb, 2019
by Fifi Arisandi
STOs are bad investments and they're failing, Andy Singleton says

Securities exchange, Aboveboard’s founder, Andy Singleton posts on Medium on how he views the securities token market.

“The market is dead,” Singleton wrote, defying the popular predictions on securities tokens this year.

Read more: Security tokens are already shaping up to be the big trend in 2019 crypto

He compared the securities token market with the non-tokenized private security market, which he said to absorb about $50 billion a day in new supply. The huge number shows that there’s a “massive base of buyers for desirable securities”, whereas for the tokenized, he claimed to attract “approximately zero percent of that demand”.

Some of the reasons of the failing of STOs are the fact that they’re not designed to trade on high volume, while at the same time they fail to “disclose enough information to allow a buyer to determine a fair price”.

Quoting his statement, “From the point of view of buyers, these securities suck. They are bad investments. They don’t really have the promised liquidity, and they either have high costs, or they don’t do enough disclosure to allow the investor to price a risky investment, or they are incredibly boring and low yield.”

Moreover, he said, “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”, bringing up Bcap and SpiceVC as examples.

“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,” he explained.

Regardless, he commended STOs as they facilitate important innovations to the securities industry, such as real-time royalties and voting.

He closed his statement by saying, “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.”

Will STOs succeed to take off this year or they will fail like Singleton said? As always, stick with Chepicap for updates.

Read more: Is 2019 the year of the security token?

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