Token based funding methods are attracting the attention of institutional investors slowly. The biggest potential for them is yet to come.
ICOs were supposed to open the startup investment market for everybody with better conditions than Crowdfunding – in the first phase of ICOs, the wild west sphere allowed them to enter the market easily.
The custody question
For institutional and larger investors, however, tokens are more complicated in terms of custody, clearing and settlement. As recently explained by Forbes, the SEC has not decided yet whether a blockchain can serve as a custody or not – regulations are unclear.
Secondary market trading
Security tokens, which might be the most interesting for insitutional investors, are currently not very liquid. The market lacks exchanges or brokers that are listing security tokens – which makes it more difficult to invest in them. As Caitlin Long recently stated on Forbes, the costs of integrating a security token overweigh the profits made through their trading.
A great chance
Opening the token economy for institutional investors is an important potential that is not leveraged yet. As the recent efforts show, governments are very interested in establishing regulations for Blockchain technologies, tokens and ICOs – which would make them more reliable. At the same time, projects like tzero are already working on solutions to allow security token trading.
Both combined is making the ICO and security token market accessible for insitutional investors. That would bring much more capital into the market.