Last week’s “Better Ads + Fewer Paywalls + Tokenized Capital” email was all about brevity. This week’s email is longer, as I’d like to provide a broader update based on dozens of conversations over the past ~six weeks. These companies (see image below for a sample of who we’ve talked with) offer a wide range of capabilities and are all innovating to move the security token ecosystem forward.
We’ve drawn four conclusions from the conversations:
1. Regulation moves at its own pace. There’s no doubt that security tokens are on the “right side of the law,” and that security token issuers that choose to abide by SEC regulations (as we’re doing) can offer investors a degree of confidence that doesn’t exist in many coin offerings. But regulation is a complex topic, and many details remain to be sorted even if you’re trying to be compliant. As one company said, “We’re writing the rulebook right now” for listing on a token exchange. The catch: they have a draft of the rulebook, but are waiting for feedback from regulators on what they’ve proposed. It will take time. #slow
2. The boring parts of the business matter—a lot. Topics like KYC/AML, custody & control, and insurance have come up in multiple conversations. The world of tokens and blockchain has been largely unregulated, and there is no shortage of love stories gone wrong and fortunes literally thrown away. “Investors need institutional-grade solutions for token custody & control,” was one quote that rings very true to us. That’s been an important part of our planning, as it’s clear that we need to have processes and the supporting technology to support the cancellation & reissue of lost security tokens. That’s a very important difference between security tokens and cryptocurrencies. #detailsmatter
3. Company swim lanes are evolving. Most listing conversations at this stage involve ecosystems of loosely-affiliated providers, each working to provide a slice of necessary services and technology (token economics consulting, smart contract development, clearing and transfer functions, and the all-important communication with potential investors). Given that many of the companies are themselves quite fluid, it’s not always clear how each player will define, price, and go to market with their offerings. One interesting result of this phenomenon: companies who are working together suddenly recognizing that they’re now competing with each other. #awkward
4. Liquidity is an outcome, not an input. Truly liquid markets involve the right structural elements, the right technology, and the right regulatory framework. With careful stewardship of these pieces, investors will gain confidence in future security token markets. And investor confidence is the ultimate requirement for liquidity. All of us have our part to play in ensuring that people and institutions feel comfortable playing in the space. #letitgrow
This is just the tip of the iceberg, and of course, a full discussion of security token liquidity is long and not easily digested in an email that you’re probably reading on an iPhone. If you want more detail on the topic I recommend the Security Token Thesis by Stephen McKeon. His write-up includes the diagram below (itself cited from another source); I think it does a nice job of illustrating the complexity of securities settlement beyond the simple “buy” and “sell.”
Finally, at SocialFlow we continue to have a front row seat as the tech titans flex their muscles in the market. Last week on Varney & Co. on Fox Business we discussed how Amazon may be coming for Facebook, and how technology disruption (read: blockchain) may ultimately be the biggest threat to existing technology companies. As Stuart Varney noted at the close of our segment, “Monopolies don’t last long in fast-moving technology industries.”
We continue to move forward with plans for the Universal Attention Token, and the associated capital raise is live. Contact investor_relations@
socialflow.com if you have questions or would like to learn more.
Much more to come!