To say that 2019 was the year of Security Tokens wouldn’t be incorrect.
With the legalities of initial coin offerings (ICOs) and their resulting tokens now being called into question by governmental agencies such as the SEC, the cryptocurrency industry must look at other avenues to raise funds. A proposed solution has been that of security tokens.
These security tokens would give legal clarity to both the investors and regulatory watchdogs in the sector, allowing for consensus around token issuances and a variety of potential possibilities within the traditional securities sector.
To meet this requirement, native security token exchanges are stepping into the space. Some of them have already established their presence within the larger cryptocurrency industry.
Here’s a list of the top three security token exchanges within the cryptocurrency sector.
Top Security Token Exchanges
tZero was founded in 2014 and launched on January 24, 2019. The exchange is based in the United States and utilizes blockchain technology to issue, trade, and settle digital securities. It is fully compliant with laws and the regulations imposed by regulatory agencies such as the SEC and FINRA. One of the compliances also means that it only caters to accredited investors at the current moment.
While this exclusivity is a point of contention among pioneers of an open and inclusive financial system, tZero start out in a restricted manner. tZero will act as an alternative trading system, allowing for more liquidity, transparency and convenience in the trade of assets.
tZero aims to offer trades of other tokenized assets in the future. These assets will range from forms of debt to real estate. It is important to note that tokens will only trade during regular market hours.
Gibraltar Blockchain Exchange
The Gibraltar Blockchain Exchange (GBX) launched in 2017 and is part of the EU-regulated Gibraltar Stock Exchange Group. GBX is trusted, regulated and insured. The aim of this exchange is to take what its team knows about investor protections and safety in the traditional stock markets, and apply it to the emerging cryptocurrency industry.
GBX has invested heavily in setting up its own processes for token issuers and token buyers. This means that prior to being able to participate in GBX token capital markets, both issuers and buyers will have to undergo a few more steps.
This is to ensure that compliance is being met in all aspects, securing not only the investors or buyers, but also the developers or creators of the asset.
GBX is betting on its experience in the traditional stock markets, its due diligence process and its innovative practices to be one of the top exchanges for institutional and retail token investors.
Potential token participants need to utilize GBX’s native ERC-20 token called STACS in order to conduct transactions on the platform.
Open Finance Network
The Open Finance Network is a trading platform and holistic ecosystem for security tokens. Based in Chicago with representatives in places such as Los Angeles, New York, and Denver, the Open Finance Network seeks to be the premiere platform for trading regulated tokens.
The organization has partnerships with prominent leaders in the security token landscape, ranging from Securitize to Abacus, and from Polymath to Tokensoft.
OFN conducts trading, clearing and settlement activities through an alternative trading system as well.
It is currently open fully to accredited investors. In the future, it plans to open its doors to non-accredited investors when Reg A and Reg CF tokens are listed.
With these exchanges currently in operation, their success in facilitating security token trading may inspire other entities as well. For all we know, within a year, we may be looking at a subset of STE exchanges on its own.