The emergence and growth of the securities tokenization industry in the last two years have led to a new ray of hope that the capital markets are set to undergo a notable reform within the next decade and beyond.
Former VISA Executive Roel Wolfert also showed his support for that popular opinion, saying precisely in a recent interview with Finance Magnates that security token offerings (STOs) have 'huge potential.'
He elaborated on the numerous benefits that the new fundraising mechanism brings to the table for both investors and firms who choose to embrace the concept.
For investors, Roel Wolfert noted that the idea behind STOs is to make companies more accountable unlike Initial Coin Offerings (ICOs) where projects can raise money this minute and then disappear the next.
“There’s a lot of obligation. There’s no easy money— you can’t just disappear anymore,” he reportedly said.
For firms who choose to conduct STOs, Wolfert suggested that the model presents other opportunities beyond helping these entities raise funds for their operations and growth.
"It’s a marketing opportunity. It’s a communications and loyalty opportunity, as well as a great financial construct to clean up [a company’s] balance sheet and take control of your growth,” he explained.
After acknowledging the numerous benefits tied to STOs, Wolfert noted two areas that needed improvement if the industry will reach mainstream adoption — Liquidity and Regulation.
The secondary market for trading security tokens needs to be improved for the industry to fulfill the liquidity promise that it brings to the capital market. Also, although regulations for STOs in Europe are quite clear, according to Wolfert, other issues such as how the U.S Securities and Exchanges Commission (SEC) will treat U.S investors who buy into STOs in Europe need to be sorted.
Projects also need clarity regarding how much they can raise while the amount that retail and institutional investors can put into STOs needs to be specified before the industry can move forward.
Interestingly, the former VISA executive is not the only one who has recently hailed the potential embedded in STOs. We reported last month that Overstock CEO Patrick M. Bryne wrote his investors that the security token industry could be worth over $900 billion in the future.