Hello TAO Tokenized Asset Offering, Goodbye ICO, Tokens will be Changed in 2018
January 11, 2018 12:52 pm
TAO Tokenized Asset Offering
As we have entered 2018, it arrives that blockchain‘s participation in capital formation has only started.
An unfortunate introduction of both natural and bad actors begs for regulatory analysis, covering the intentions of decent market participants eager to operate within an informed set of dynamic guidelines and eventual laws.
In this environment, many expect increased regulatory action and implementation by the SEC against issuers in 2018. But we don’t expect the actions to stop there.
We would also like to see the implementation actions against specific “exchanges,” which transacted in coins that are definitely securities. We would also like to see FINRA jumping in with the SEC bringing actions against individuals who acted as placement agents and finders in taking advantage of ICO sales. Unlicensed investment banks or unauthorized entities will be the regulatory targets, through having conducted securities business for their ICO activities.
The huge importance for everyone involved during this time will be the need for quality education, relieving confusion surrounding how blockchain’s facilitation of financial transactions is different from the cryptocurrencies.
As a capital forming tool blockchain will increase the reach of both small- and large-scale fundings, adding a real new layer of clearness for issuers and regulators equally, while confirming KYC (know your customer) suitability agreement and providing investor protection, straight through processing.
We will soon see the growth of collaboration between the blockchain and crypto community and the currently regulated entities, like a step toward asset quality and rigorous due attention starts to control the marketplace.
The result will be improved activity and investment by institutional investors and venture capitalists.
Changing the Name
As the transformation observes, those who know current practices in token economics can expect cosmetic changes.
Access to new market participants greatly expands capital pools, but most ICOs adopt distributions as securities, which is provided clear guidance from SEC. In response, only a few “real” utility token distributions will take place in 2018. The SAFT framework will rapidly decline as a distributing structure.
As a response, We expect that a new second-generation acronym (such as tokenized asset offering or “TAO”) will replace ICO. Increasing bad press, regulatory enforcement and class action lawsuits (concerning coins issued before the infamous DAO) may dominate headlines, and ultimately, dirty the monicker.
But this new model will not just be the same idea with a new coat of paint. Expect the SEC, CFTC, and FINRA to cooperate on industry guidelines that merge the priorities of each, very similarly to how the SEC and NASSA cooperated for Reg A+ during the JOBS Act.
A regulatory oversight union would propose multi-agency rules for tokens, addressing their dual role in capital raising and eventual transactions as a secondary instrument.
This may create a pathway for perhaps an integrated hybrid token, which is not only a security but also maintains a derivative utility function and or an alternate currency status, which may settle the utility vs. security vs. commodity debate.
Size and scope Category
On the beginning days of the ICOs will be credited with launching and accelerating the use of smart contracts for aggregating capital. Announced as the incentive for major Wall Street disruption, tokenized securities will lead to the second generation of market participants, scaling global capital formation upward.
2018 will see the approval and rapid surge of TAO-style instruments, as the next wave dominates 2017’s ICO issuance. An immunity program for pre-DAO participants is also in order, for those preferred to view their tokens as securities, deserving of a regulatory framework.
The market will be updating the functionality and building out the new infrastructure for the sector. Securities trade clearance, settlement, transfer, depository and custody methods will grow along with the modernized securities laws, lending greater clarity to regulators and comfort to participants. Standardized and permanent smart contract checking paths and archiving invite large institutions and venture capitalists to use this new tool to drive changes in the democratized access to capital, secondary liquidity and wealth creation that blockchain brings.
Traditional large financial service institutions will join the place by getting early-stage market participants, while others build theirs out naturally or by poaching teams. The growth section firms will eventually wake up to market share decay and realize that tradable TAO assets could become a significant trading desk product, which features monetizable profit margin, volumes, and volatility.
The future of smart contracts as an essential tool in finance is fixed and immutable.
Women will win
We do not think it is just the money which flows as a benefit. The acceptance of blockchain and appearance of smart contracts will have so many kinds of benefits.
Social media will democratize tokenized securities promotion by increasing the issuer’s reach beyond established funding channels. Updated capital formation, compounded by stronger investor education, can level the commercial playing field for women, affinity groups, fan bases and diaspora communities that also help from investing’s many side effects.
Directing capital toward the underutilized global female brain trust could empower a mass of resource-deprived entrepreneurs, business leaders, and innovators. This intersection of democratized capital, tech advances, and social media may even begin a tectonic paradigm shift that accelerates gender equality.
In this way, we expect blockchain crowdfunding to ensure greater financial independence for women, a result which will confirm that United Nations Sustainable Development Goal number five (gender equality).
Thanks to the blockchain, 2018 will be a year of change and volatilization, but we hope, composition as well.