Security Tokens Are the New Crypto – But You Probably Can’t Afford Them

It was only last year that startups launching new digital currencies were raising ever larger sums through initial coin offerings, giving investors who hadn’t bought Bitcoin when it was cheap a chance to get in on the crypto craze. Then the main U.S. stock market regulator ruined the party, as it stepped up enforcement of its ruling that most ICOs were in fact securities that had to be registered with it. Now a bunch of startups are taking a different approach, asserting that they’re playing by the regulator’s rules by offering what they call security tokens. They’re marketing security token offerings, STOs, as the next hot crypto thing. They’re also pitching their wares only to the rich.

First, they raised a ton of money -- over $21 billion in 2018, according to CoinSchedule.com, a crypto market tracker. Then, a lot of the people who shelled out that money lost a lot of it. Monthly investments in ICOs peaked at $5.8 billion in June of 2018 before falling to one-tenth as much in December as prices of many tokens tanked by 90 percent. In part, that reflected the general bursting of what looks to have been a cryptocurrency bubble, as Bitcoin and other digital currencies re-enacted the fast up and faster down of the e-commerce market crash.