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STO Market Trends 2021: The State of Security Token Offerings

Cryptocurrencies and Blockchain changed the traditional methods of raising funds for startups. The conventional ecosystem, generally based on crowdfunding, had its drawbacks and concerns.

So to raise capital in the blockchain ecosystem, ICOs (Initial Coin Offerings) were introduced. In ICO campaigns, project owners sell tokens to a group of early investors who could use these tokens to access products and services.

Although the ICO mechanism was an excellent way for both startups and investors to make money, it was prone to scam with significant issues of non-regulation. According to Bloomberg‘s research, over 80% of projects (by # share) were identified as scams. There was a need for proper regulation and a system held under legal regulation and adequate security measures.

One thing led to another, and the concept of STO, i.e., Security Token Offering, emerged in 2017. The market quickly adopted and started using STO to fund their projects. This mechanism was suitable for investors, too, as they got a regulated way to fund the projects they think had the potential to do good in the future.

STO Market Trends

According to Security Token Advisors, 15 countries have defined security tokens around the world when we look back at the last year. When we talk about banks and prominent financial institutions, 39 out of 100 banks in the world are working on STO’s or blockchain applications.  Besides, we also observed the launch of new International centralized exchanges to facilitate STO processing.

According to a PWC study, 2 STO’s raised a collective funding of roughly $22 million in 2017. In the very next year, this figure reached $442 million raised from 28 Security Token Offerings.

In a recent interview by Nisa Amoils when Herwig Konings, (Partner and CEO of Security Token Group) was asked about the future of STO in 2021, he said:

The security token market cap grew by over 500% in 2020, and the best is still yet to come. I believe this number will continue to grow significantly, reaching over two billion dollars by the end of the year. As larger institutional firms continue to enter into the security token industry, I think we’ll see funds enter this space in a big way in 2021. I predict that over $100M will be raised by security token offerings this year. Worldwide exposure to real estate, private equities, and the hundreds of other security token use cases, including art, luxury cars, and sports teams, is now possible. I believe the industry on pace to see thousands of security token offerings and over 100 new listings on secondary markets around the world, a 10x improvement from 2020.

by Herwig Konings

STO Market Size

With a solid foundation, STOs were supposed to grow over time. We also observed a large percentage of funding raised using STOs. According to a recent study by Opimas, STO has so much potential that it is predicted that around 30% of fundraising will be carried out using STO.

The tokenization market is growing rapidly. According to Plutoneo, a CAGR of 85% is predicted in the tokenized market in European Union from 2018 to 2024.

Is 2021 the Year of the STO? – Market Trends

One of the emerging markets when it comes to STO is the real estate industry. In blockchain technology, an asset owner could “Tokenize” the property, i.e., Security Token, to represent shares of the property. These tokens have some value and could be purchased by investors.

There are multiple options for asset owners to market and sell their tokens, and they are in complete control. The global real estate market is valued at US$228 trillion. Blockchain technology combined with STOs opens up the market globally, thus offering opportunities to asset owners and investors to join the market from all over the world.

The Bottom Line

Issuing token using STO is easy, safe and it cuts the intermediaries. For the long run and in the future, they could be an excellent way for startups to connect to the crypto space.

Seeing the escalation in a recent couple of years and the interest of huge industries such as real estate, gaming, and even the entertainment industry is a sign that STOs will be a vital part of the digital financial system in the future.

Only time will tell what the future of STO will be!


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