If 2017 was the year of the ICOs, 2018 will be the year of the Security Token. In contrast to classic utility token sales, these provide more security for investors and are subject, at least in part, to regulatory supervision. The US crypto exchange Coinbase now wants to grow strongly in this market.
Coinbase is one of the largest and best-known platforms for Bitcoin formula
Now the American company wants to incorporate three financial service providers in order to do business in the area of security tokens according to onlinebetrug. Specifically, according to a company spokesman, it is about Keystone Capital, Venovate Marketplace and Digital Wealth. The responsible regulatory authorities now give Coinbase the green light for the takeovers. With the takeover of the companies, Bitcoin formula will also receive licenses as a broker, provider of alternative trading systems (over the counter trading) and investment advisor. In particular, the authorization to operate alternative trading systems makes it easier for Coinbase to set up a trading platform for security tokens.
The San Francisco crypto exchange is diversifying its business model with these takeovers. Competition between trading platforms is fierce and margins are declining as more competitors enter the market. The expansion into new business areas promises investors and company founders lucrative margins and sustained competitiveness in the future as well. The trading of securities as security tokens has so far been little developed. There are no trading places explicitly for security tokens.
Security tokens as a cost-effective alternative to stock exchanges
Coinbase, with around 20 million active users according to its own figures, is thus putting a foot in the door of a potentially billion-dollar market. In contrast to utility tokens, security tokens are subject to regulation but are accepted by the authorities. The advantages over traditional shares remain: Investors can trade the tokens more easily, cheaper and faster than securities on a stock exchange. For companies, security tokens offer an enormous cost advantage: if numerous consultants accompany IPOs at enormously high hourly rates, security tokens can be implemented leaner and cheaper. SMEs (small and medium-sized enterprises), which were previously too small to go public, will now have access to a pool of investors. So far, they have been denied access to this pool. This means that both sides, investors and companies, benefit from a regulated security token.
Coinbase is worth almost 8 billion US dollars
The value of Coinbase has grown strongly year-on-year. When the crypto exchange collected 100 million US dollars from investors last year, Coinbase achieved a valuation of around 1.6 billion US dollars. In the meantime, around a year later, analysts estimate the company at around 8 billion US dollars.
Despite the success of the ICOs in recent months, the utility tokens are under strong regulatory pressure. This year alone, companies collected over 12 billion US dollars via initial coin offerings. The problem: the legal uncertainty. Many of these token sales operate in an unregulated grey area. In the worst case, some tokens are prohibited by courts and are worthless. Start-ups are increasingly pointing out the danger in their white papers. The US Securities and Exchange Commission recently made it clear anyway that most tokens are more like securities in terms of their function.
Only on Friday Coinbase published a declaration of intent to include five more coins in trading. Considering the number of globally tradable coins, the number sounds low. However, Coinbase currently lists only four crypto currencies: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. In the future, Cardano, Basic Attention Token, Stellar, Zcash and 0x could be added.
According to media reports, Coinbase itself is aiming for an “IPO” next year. It remains to be seen how this will turn out, whether via a classic stock exchange or as a security token.