The global listed trading volume of security tokens is expected to grow to $162.7tn by 2030, with a total security token issuance worth more than $4tn in the same period. This comes as leading analysts tip security tokens as the shining crypto asset class of the coming decade.
A security token is simply a tokenised share of an asset – typically a share of a business, but also often used for real estate and other alternative asset classes.
These differ from utility tokens such as Ethereum (ETH) which have value tied to usage and function.
Trillions of dollars worth of assets await securitisation through blockchain tokenisation, which strikes a special appeal over traditional fractional ownership structures such as REITs due to the immense volatility afforded by crypto assets.
Gary Gensler, the SEC Chairman striving to deliver securities legislation to the crypto industry, explained the benefits of the volatility while teaching blockchain finance at MIT.
“When I was at Goldman Sachs for years, we used to have a saying… volatility is our friend,” he said.
“It’s often not the friend of many people in the markets, but if you’re in the world of finance… you’re in the world of inter-mediating risk.
“So volatility is a form of risk, volatility was always our friends… because it’s so volatile.”
The findings have been published by top strategic market analysis firm Quinlan and Associates in a report titled Cracking the Code: The evolution of digital assets into the mainstream, and was commissioned in response to a demand for analysis of the global regulatory arbitrage window.
Speaking to Coin Rivet, Benjamin Quinlan, CEO and managing partner at Quinlan and Associates, explained how the onset of regulations as the industry meets maturity is opening avenues for legitimate security token offerings.
“With regulatory scrutiny of digital assets on the rise, we anticipate the regulatory arbitrage window to narrow in coming years, causing a shakeup in the broader digital asset universe” he explained.
“However, growing levels of regulatory scrutiny is also now legitimising certain forms of digital assets, including security tokens.”
The report captures a snapshot of an industry wrestling with new-found maturity, and depicts a narrative of crypto exchanges and brokerage services racing to become the first to launch the first security token exchange.
“While we expect there to be a number of winners, we anticipate security token exchanges to be the biggest winners of all,” the CEO added.
“But the divergence in attitudes between players that are actively innovating and those that remain on the sidelines could see new national security token exchanges crop up and form monopolies.”
With venture capitalists globally excited by security tokenisation and the opportunities it affords for increased transparency, liquidity, and dematerialisation – all eyes are on the space.