STO 2021 Recap + 2022 Predictions
2022 STO Predictions: First, there will be a huge increase in the volume of STO issuances globally, with a total STO AUM that will exceed $10B USD. New STO investment products will be using smart contracts and blockchains (here is an example of World’s 1st Digital SPACs). There will be growth and adoption of Investment […]
12 min read
There are so many things going on that it is literally hard to keep up, but we will endeavour to make this as short, useful, and usable as possible for our community. For those with only a minute to spare, here is the juice straight up:
CEO and Co-founder InvestaX. Building key digital infrastructure connecting CeFi + DeFi. Creator of the world's 1st Digital SPAC, 1st AMM/Liquidity pools for security tokens/digital securities and 1st Digital ESOP (DESOP). Investor, Advisor and CRO (Chief Representative Officer) of InvestaX's Capital Markets License from the Monetary Authority of Singapore.
2022 STO Predictions:
- First, there will be a huge increase in the volume of STO issuances globally, with a total STO AUM that will exceed $10B USD.
- New STO investment products will be using smart contracts and blockchains (here is an example of World’s 1st Digital SPACs).
- There will be growth and adoption of Investment DAOs.
- Multi-jurisdiction STO launches will become a reality.
- The International STO Alliance will become the leading group for global STO launches.
- A cryptocurrency platform will acquire an STO platform.
- An STO platform will acquire a cryptocurrency platform, and an STO platform will be valued at more than a billion dollars.
- NFTs will expand to include royalty and income-producing NFT products that are actually classified as STOs (there are more, but hey, 8 is a lucky number).
Stay with us here as with so many aspects to cover, I will highlight the most important developments. If I missed out on mentioning your project/platform, apologies in advance, and if you want us to feature it next time, please DM so we can add it to our Q1 2022 recap.
Firstly, thank you to our community members, investors, partners, issuers, and our amazing team. The last men/women standing from the STO 1.0 are still here, driving the industry forward.
It has been difficult, mostly because of legacy rent-seeking middlemen that never want to get out of the way, but also because we are completely redesigning the private markets, which, as the saying goes, “Rome wasn’t built in a day”.
As we start 2022, we begin a new era – armed with a plethora of blockchain and technology talent, fresh capital flowing from Wall Street and cryptoland like never before, support from regulatory bodies around the world eager to cash in on the digital asset industry, and lastly, because the incumbent capital markets are now FOMO-ing to the space or they feel their businesses will become irrelevant, and that is risk many do not want to take.
2022 is shaping up to be the banner year for STO and what we believe will be considered STO 2.0 when we look back in time. STO 1.0 had a difficult birth, poor quality projects, no infrastructure, lack of regulatory clarity, confusion about the technology, misunderstandings about the difference between digital currencies and digital securities, and the list goes on.
However, in 2021, there was a major shift in understanding and investment from the market into the digital securities and security token markets. The infrastructure that was being built and licensed through the first three years (taking 2018 as the genesis block for STO) in STO started to come to life and with that, a significant shift in the quality and size of products entering the market.
The tokenization of everything is happening, and it is happening faster than ever before. InvestaX has always believed that in a world of digital currencies, the next evolution/asset class to come to market would be digital securities, interacting instantaneously on blockchains and creating an explosion of value never seen before.
The convergence of CeFi (Centralized Finance) and DeFi (Decentralized Finance) is real and can be seen with the three following examples (but there are many more out there) – Singapore’s largest bank, DBS, launched a cryptocurrency exchange, which was quickly followed by Standard Chartered, with tech help from our friends at OSL. That was the old world coming into the new world. Then we had the new world coming back to the old world, as FTX cryptocurrency exchange launched tokenized stocks, the first STO launched by a leading cryptocurrency platform.
It is exciting to see the banks now competing in the space and to see who will be the eventual winners. The securities markets are enormous, so there will be many players offering different products and solutions (How many banks and how many crypto exchanges are there today? We need to serve a multi-billion population, so there’s plenty of room for many good companies, and the opportunities do look infinite.)
What probably took everyone by surprise last year was the explosion of NFT. What are NFTs? Are they just hype or mania or much more than that? You can check two great explainer videos about them in the links tagged.
Now, we are rapidly adding new digital asset types/industries, and it is amazing to watch it all come together.
What have been the STO industry’s previous problems?
- Crypto bros shilling failed ICOs as STOs.
- Lack of infrastructure, mainly exchanges and custodians
- Wildly overpriced asking prices for services
- Unlicensed token issuance platforms selling the value of tokenization but without the ability to deliver the necessary licensed activities around issuing and trading a security on their own
- Poor quality offerings (the S in the STO was non-existent or worth very little)
- Real asset owners trying to sell underperforming assets to cryptocurrency investors (for “stable” returns), which is hilarious as no one invests in crypto for stability
- The misunderstanding that secondary trading is the only value proposition for tokenization
What are the new solutions? What has changed now?
- Licensed and technology-enabled platforms, broker-dealers, exchanges, and custodians in all the major capital markets, including Singapore, London, Hong Kong, Tokyo, New York, Chicago, Germany, and more, offering end-to-end solutions for advising, issuance, trading, and custody of compliant STO.
- Regulatory support with leading jurisdictions being Singapore and Switzerland out in front, but lots of positive movements in other countries as well.
- STO offerings worth investing in are being brought to market
- DeFi solutions for liquidity – IX Swap, the “the Uniswap for STO”
- CeFi/DeFi private market data solutions – Inveniam
- DBS bank launching both cryptocurrency exchange = old world selling new world assets
- FTX cryptocurrency exchange launching tokenized stocks (STO) = new world selling old world assets
- DBS launched an STO exchange, and Standard Chartered bank also launched a cryptocurrency exchange
- Regulators actively support the industries’ growth by giving licenses and funding support.
- Chief FinTech Officer of the Monetary Authority of Singapore, Sopnendu Mohanty, is even on RealVision explaining the importance of positive regulatory support for blockchain growth.
What are most people missing when they think about STOs?
DSO 1.0 started in 2018 as many failed ICOs started calling themselves STOs because certain elements of their offerings looked and felt like securities.
Then we had a three-year window where great teams were getting necessary licenses and technology built, they are broker dealers, exchanges, custodians, transfer agents and more, and here is a list of the best:
- OSL Hong Kong
- Archax UK
- InvestaX Singapore
- Atlas One Canada
- Oasis Pro Markets USA
- Securitize USA
- INX USA
- Black Manta Germany
- Tokeny Luxemborg
- Vertalo USA
- Securrency UAE/USA
- Tokensoft USA
- HKBitEx Hong Kong
- HKVax Hong Kong
- Fusang Labuan
- Toko HK
- ADDX Singapore
- EDSX Switzerland
- BSTX USA
- HEX Trust Asia
- 1st Digital Hong Kong
- Propine Singapore
- Hydra X Singapore
- Iveniam USA
With better quality issuers coming, we can expect more and more investors to enter the market. What is exciting is that STOs issued on public blockchains can (commercial terms aside) now legitimately be launched to a global marketplace, and we are just scratching the surface of the potential for STO at the moment.
What DeFi services (brought staking, lending, borrowing etc., to crypto) did for cryptocurrency, InvestaX and partners are doing for the STO industry. DeFi made a lot of cryptocurrencies useful, which previously were mostly just a speculative asset (we can debate the store of value concept another day).
By being able to use your crypto assets for lending, earning interest, staking benefits, etc., we could argue this was a 0-1 moment of change/value add, and the growth numbers speak for themselves below.
Today, most STOs are a tokenized share of a fund or asset. However, when you think about what investors can (not) do with a standard share of a private real estate of VC fund (i.e. typically nothing but sit around and wait 5-10 years for an eventual payout) and then envision what happens when investors can actually use their private market STO assets, in a similar manner to their public market assets (i.e. think DeFi services above), we are going to see an explosion of innovation, new products, useability of assets, and STO industry growth – and that is what most investors are not even thinking about yet, but it is coming.
The more good news? More big-name companies are coming to the scene every day. We are digitizing an $8 trillion USD private market today that McKinsey expects to continue to grow considerably over the coming years towards a $15 USD trillion market cap.
Financial institutions are sitting around board rooms asking themselves what they are doing in this space, and if they don’t move now, they might become irrelevant. Every major institution has been asking these questions over the past few years, many hiring their first “Heads of Digital” roles. Now, the time for talk is over, and they must act on real products and services, or they will lose this fight. Software and tech are truly eating the world. To see what I mean, check out the global reports below, and you can see many of these brands in action because the time for STO growth is right now.
In 2021, we highlighted many of the leading projects and developments in our quarterly reports – as did many others – and here are some of them:
- Global Digital Securities Report Q1
- Global Digital Securities Report Q2
- Global Digital Securities Report Q3
- Our Top 21 Blockchain reports CB Insights
- Time for trust the Trillion dollar reasons to rethink blockchain PWC
- IBM Blockchain research
- Messari Crypto Thesis 2022 (a favourite)
Top Newsletters/Podcasts/Research That Adds the Most Value
- InvestaX – Register at InvestaX to get more materials like this and the latest deal flow.
- Pantera – This is the first investment firm in the US to launch a digital currency, early-stage token, and blockchain-enabled venture funds, and has a great newsletter from CEO Dan Morehead.
- RealVision – As a member of RealVision since they began, they add immense value and are heavily focused on the digital asset industry. Whatever level of membership you take will be worth it.
- Atlas One– In depth research and analysis to drive investment decisions
- LongHash Ventures – This is a homegrown Singapore talent that might bend your mind a bit but helps you stay on the cutting edge of Web 3.0.
- STO Market – Reinventing capital markets with Security Tokens
- Forkast News– Stories of emerging technology at the intersection of business, economics and politics
Top STO Twitter Handles to follow
- @WayneTrench – Wayne Trench (CEO, OSL)
- @Grodfather – Graham Rodford (CEO, Archax)
- @PatLaVecchia – Pat LaVecchia (CEO, Oasis Pro Markets)
- @carlosdomingo – Carlos Domingo (CEO, Securitize)
- @sdatika1 – Shy Datika (CEO, INX)
- @LucFalempin – Luc Falempin (CEO, Tokeny)
- @masonic_tweets – Mason Borda (CEO, Tokensoft)
- @davehendricks – Dave Hendriks (CEO, Vertalo)
- @tokenwig and @kylesonlin – Herwig and Kyle (Co-founders of STO Market)
- @julian2kwan – Julian Kwan (Co-Founder, InvestaX/IX Swap)
Leading Blockchain Courses
- Digital Securities and Blockchain – Institute of Banking and Finance by InvestaX
- ConsenSys has many blockchain-related courses.
- Digital Assets and Blockchain Technology from our good friend Dan Libeau and SMU
- Oxford Blockchain Strategy Program
- Abra’s 10-Day Cryptocurrency Course
- Coingecko has 2 books How to DeFi Beginner & Advanced
Leading STO VC Funds
- Spice VC – Digital Securities Ecosystem leader
- Cosimo X – Blockchain focused Venture Fund
- Blockchain Capital – Blockchain Venture Pioneers
Leading STO Legal Firms
Leading STO Liquidity Solutions
- IX Swap– 1st Automatic Market Maker (AMM) and Liquidity Pools for STO and NFTs
Other Recommended Readings
There are so many articles to read and podcasts to listen to, so here is a list of what we consider essential learning resources that you can check out:
- The Crypto Thesis for 2022 by Ryan Selkis at Messari. This is an epic read, and if it doesn’t get you excited and off your seat to want to invest more time and energy into understanding the digital asset space, frankly, nothing will.
- What are NFTs? And are they hype or mania?
- Bruce Fenton is a character and delivers a very entertaining “Introduction to Security Tokens” mini-series.
- The Mirrortable – https://balajis.com/mirrortable/
- Future – Decentralized Autonomous Organizations (DAOs) Canon
- Ethereum Foundation – DAOs, DACs, DAs and More: An Incomplete Terminology Guide
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