Greenwhich Associates have published a report that studied how regulated initial coin offerings could transform the market structure. The consulting company concluded that stock certificates could someday be endangered and replaced by the new invasive species of security tokens.
Efforts by the U.S. Securities and Exchange Commission and the Commodities Futures Trading Commission (CFTC) to regulate cryptocurrencies and initial coin offerings (ICO) are expected to pave the way for security tokens to transform financial markets generally, and the U.S. stock market in particular. That is the conclusion of Security Tokens: How Regulated ICOs Could Transform Market Structure, the report authored by Greenwich Associates.
Regulators all over the world, including the CFTC in the United States of America, are attempting to tame the initial coin offering craze in order to protect investors and the overall ecosystem. Most ICOs will be considered securities instead of utility tokens. Under that framework, these still-evolving vehicles are required to comply with U.S. securities regulations and evolve into Security Token Offerings (STO).
Richard Johnson, Vice President of Market Structure and Technology at Greenwich Associates and author of the new report, commented:
“Blockchain-based securities will undoubtedly become a more common feature of U.S. securities markets—we are just at the beginning of this evolution. Institutional participation will grow as the SEC lays out a regulatory framework, so it is important that investors understand the developments occurring in the space and the potential regulatory path forward.”
The industry’s distributed ledger technology initiatives are converging as regulation comes into the crypto space, which means that an Alternative Trading System for security tokens will probably share many characteristics with current industry initiatives, according to the report.
Most blockchain experts say that distributed ledger technology (DLT) will reduce operational costs, shorten settlement time, reduce risk, and create new revenue opportunities. Greenwich Associates, however, claims that traditional financial services companies have mostly steered clear of the crypto space out of concern about the regulatory status of crypto enterprises.
A recent study conducted by Greenwich Associates found that institutional investors increased their annual spending on risk and analytics platforms to $700 million, with expenditures nearly doubling to 10% of total buy-side trading desk technology budgets in 2017.
