Jonah Schulman, the marketing director at Security Token MarketA US-based company that focuses on a listing website for security token offerings (STOs) around the world says that when it says “no” to US stocks and “yes” to security tokens, it “actually does.” Yes ”says blockchain or distributed ledger technology (DLT) and“ no ”to the existing financial infrastructure.
As explained by Schulman, a security token is basically a digital representation of an asset that is recorded on the blockchain or DLT-enabled platform. As a result, all US stocks can and will “become a security token when traditional markets use blockchain as the underlying infrastructure,” Schulman predicts.
“[Currently,] The US stock market still operates in its archaic, traditional way. I’m certainly not shooting at the SEC or any regulatory agency, I get it [changes] … take your time. There is one problem here, however … one that is preventing the vast majority of the US population from realizing their financial potential. Unless you are a high net worth individual and / or have a connection to private investment opportunities, you are limited (for the most part) to the public investment markets. “
He also made it clear that it was not thanks to the government or some “high power” organizations that have purposely barred the general public from investing in certain alternatives. This is because transactions on privately held assets are “10 times more cumbersome and expensive,” claims Schulman.
He points out that there is a saying that “the rich get richer and the poor get poorer” and that this statement is quite relevant today as the wealth inequality gap “grows exponentially”.
He explained that many of the lucrative investment opportunities are found or realized when you “have connections to these businesses or have large sums of money yourself.” He also mentioned that because of this, it’s “incredibly difficult to make your first million, but ten times easier to make your second”.
“I’m not saying that there is a problem with wealth inequality in the world (although in some countries there is definitely a problem). I’m just saying if you come from a less fortunate family or jurisdiction your options are severely limited. With the security token technology this gap can be closed or at least closed. “
Schulman added that by democratizing, fractionating and using exemptions for private investor securities, “all investor demographics can be a piece of the pie.”
Schulman further noted:
“Some of the exemptions for private securities have become more beneficial for US retail investors. B. Increase the maximum donation amount for Reg CF from $ 1.07M to $ 5M and increase from $ 50M to $ 75M for Reg A +. Additionally, the SEC is doing a phenomenal job expanding the definition of accredited investors, focusing more on financial literacy than individual net worth, and speeding up the innovation schedule. “
It should be noted, however, that Assistant to the President and Chief of Staff Ronald Klein distributed a presidential action by President Joe Biden on January 21, 2020 that will impact recent improvements in security crowdfunding, including the Reg CF and Reg A exemption +.
Under the title “Regulatory Freeze Pending Review”, President Biden ordered that rules published in the Federal Register but not in effect be postponed for 60 days after the March 22, 2020 memorandum. Rules sent to the Office of the Federal Register but not published are to be withdrawn immediately for review and possibly approval.
On December 5, 2020, Representative Maxine Waters, chair of the House Committee on Financial Services, sent a letter to President-elect Biden calling for the withdrawal of a litany of rule changes enacted by the Trump administration – some of which Had an impact on fintechs.
On January 15, 2020, Chair Waters sent a second letter to the incoming Biden administration asking him to temporarily suspend the midnight regulations promulgated by the Trump administration. In this letter, all rules that have not yet been published in the Federal Register were requested to “postpone the period of validity of the rules that have already been published in the Federal Register but not yet come into force by at least 60 days”.
It appears that President Biden has accepted Representative Waters’ request, as the financial services regulation review was one of the first steps taken by the new administration.
The president’s actions may have an impact on improvements in the crowdfunding sector for investment, including increasing funding for Reg CF and Reg A +, as well as some other areas of fintech.
Despite these problems, Schulman believes we are “entering an era of rapid growth”. He believes that “with the underlying technology that blockchain leverages, the financial world will become bigger, stronger and more inclusive”.
“The private markets grew four times faster than the public markets … and the crazy thing is that the private markets are illiquid. As assets become liquid, their value should theoretically increase. When an asset has liquidity – most of the time it trades higher than if it is illiquid because of the attractiveness that liquidity offers – your money. “
He also noted:
“You think bitcoin is a big deal? Think again Security token dwarf bitcoin. “
Last year, there were “a total of 26 security tokens of live trading data on Stomarket.com (including 22X that split from OpenFinance last December),” noted Schulman. He also mentioned that if you had invested in the Security Token ETF early in 2020, your investment portfolio would have “outperformed US equity markets by ~ 43%.”
The Security Token ETF gained + 59.84%; While the Dow Jones, S&P 500, and NASDAQ averages “only rose + 16.78% (which is still an incredible return for every year),” Schulman confirmed.
The Security Token ETF is “a hypothetical ETF that invests in all security tokens with live trading data on Stomarket.com,” Schulman explained.