Those who try to keep in touch with what is going on in the crypto world may have noticed that while initial coin offerings (ICOs) are losing their popularity, the popularity of security token offerings (STO) is increasing.
ICO vs STO
While many experts try to find and explain the correlation between these two tendencies, analysts of PwC’s subsidiary Strategy& have come to the conclusion that there is no fundamental difference between ICOs and STOs.
According to them, STO is considered to be a more regulated and mature way of raising funds but if we classify tokens as securities, both these approaches to funding are practically the same.
This conclusion has been included in the 2019 global ICO/STO report by PwC. This is the fourth annual research of this kind. And the company has prepared it in cooperation with Swiss-based CVA (Crypto Valley Association). CVA is a non-profit organization the main aim of which is to support development, adoption and wide implementation of cryptographic technologies, blockchain, and other distributed ledger technologies.
The record volumes in crypto-crowdfunding were observed in March 2018. The report indicates that though the number and volume of ICOs and STOs significantly decreased in the second half of 2018, in general, the market reached a sustained phase of maturity. The decline is explained by the ongoing crypto winter and the shift from the ICO to the STO model.
ICOs and STOs have a number of common features, such as low entry barriers for investors as well as Know Your Customer (KYC) and Anti-money laundering (AML) regulations that are considered to be traditional venture capital and private equity fundraising characteristics.
The key difference between ICOs and STOs is that the things with the latter one are clearer: they deal with securities. With ICOs quite often everything is not so obvious. While many of them claim that they are offering to buy utility tokens, in reality, they are selling securities as well.
In total, in 2018, over $19.7 billion was raised by 1,132 ICOs and STOs. Over $5.8 billion of the volume was raised by two projects. They are the EOS Foundation that is known to have conducted the largest ICO in history with over $4 billion raised in June 2018 and Telegram messenger that managed to raise $1.7 billion.
This amount was received from investors in two private ICO rounds for Telegram’s TON crypto platform. Such a situation clearly shows that investors are more eager to invest in projects with prominent names.
Experts of PwC’s Strategy& and CVA have also mentioned the trend of the tokenization of commodities including gold and oil and the tokenization of intellectual property. And it is expected that this tendency will gain momentum in the future.