In an age of data breaches, identity theft, and financial fraud, the cryptocurrency market is definitely at a crossroads when it comes to regulatory issues, leaving very little reason for investors to be confident in the safety of their endeavors.
What we are witnessing, is the birth of a new space, similar to that of the dot-com bubble or the Internet. We may claim that we embrace change and welcome it, but the reality is that it leaves many fearful to become involved. But, at the same time, investors have this “fear of missing out” (FOMO) and want to jump into the space, often times, without the necessary equipment and/or knowledge.
Rightfully so, large investors with institutional scale money, often need safeguards in place to help put their minds at ease that their investments are safe.
So, what’s the issue?
#1 –Lack of Liquidy
Once completing an “initial coin offering” (ICO), this often leaves a lack of liquidity for many projects. This creates a problem of equal or greater significance once tokenized securities become prevalent.
An investor likes the idea of being able to liquidate, or cash out, whenever they want. Regardless of whether an investor chooses to liquidate, having this ability can make a break a platform or exchange.
While over the past few years, ICOs have proven to be an effective way to raise money, there are those in the space who capitalize off investor ignorance and naiveté. With any new form of technology, black hatters lie in wait, hoping to make a profit off the vulnerabilities in the technology itself, or in the wide gap of missing knowledge an investor gives off.
One study, as outlined by Cointelegraph, prepared by ICO advisory firm, Statis Group, revealed more than 80% of ICOs conducted in 2017 were identified as scams. Investing in cryptocurrency or other digital assets, is no different than investing in any other stock. The same due diligence is required before deciding whether to invest money and often hours into managing any particular portfolio.
So, what’s the solution here? Studying the advantages of tokenized securities in play with regulatory compliance can make all the difference in the world.
These types of securities allow for investments in specified cryptocurrencies to be held under investment contracts, thus making them more apt to be considered “legally compliant”, as well as providing comforting levels of protection for investors and their rights associated with those investments.
Utilizing tokenized securities helps bring security and legal backing of our traditional system, adding in the benefits of blockchain technology.
One company, DESICO, is a platform that issues and trades security tokens in full compliance with European Union (EU) member law. Operating under the Law of Crowdfunding of the Republic of Lithuania (Law), DESICO aims to be a model for those looking to make it in the space. The Law allows ICOs to raise capital by issuing security tokens.
Lithuania, an EU member state, and part of the Eurozone, hosts a friendly environment for the company, which is also fully supervised by the Bank of Lithuania, now under the control of the European Central Bank.
Having any exchange subject to the regulatory supervision of an institution, in this case, the Bank of Lithuania, helps to provide investor confidence to those taking part in the ecosystem. The DESICO exchange will provide immediate liquidity to any security tokens issued by any business listed on the platform.
When it comes to tokenized securities, companies should follow in the footsteps of those like DESICO, who aim to make it a much more simplistic process to survive.
At the end of the day, the space will need to have some type of regulation. How else will user adoption come into play, but most importantly, user confidence?