Security Tokens VS ICO Tokens: Interview With Dave Hendricks

Security Tokens VS ICO Tokens: Interview With Dave Hendricks
Security Tokens VS ICO Tokens: Interview With Dave Hendricks

Security Token Capitalization Method

According to Dave, in order to enter the token capitalization method, one must begin with the creation of a token and all it implies. The difference between security tokens and the tokens we see on a daily basis from most startups lays on its regulation. With a security token, there’s more than just technology, it also requires technique and knowledge in order to gather the documentation needed. The security tokens are basically digital tokens that are fully compliant with regulations currently applied to the securities market although concepts should not be confused, since a security token differs from securities in general basically in terms of liquidity.

As explained by Mr. Hendricks, the magic feature that a security token has versus a preferred share is that it’s tradable on an exchange, without, say, going and doing a board meeting, or filling out some paperwork. So, typically, when you do an issuance of a security token, you’re going to send something to someone’s wallet, like you would send a stock certificate. And once the lockup is finished, and that’s typically a year for a security in the United States, then that token, that security token, is freely tradable with other investors who are accredited or have passed some form of qualification.

“The only difference between a security token and a preferred share is actually in its specific liquidity, and that’s actually quite a magic differentiation.”

Security Tokens And Decentralization

When asked about one of the main concerns from the crypto market, decentralization, and how a security token may go against such principle, Dave shares his insight commenting that security tokens would only attract more people into the market, meaning more money into the crypto space. Regulated markets where the rules are set out are more established and therefore more used by institutional investors.

With the upcoming regulations, and especially Jay Clayton’s remarks on Initial Coin Offerings, Dave strongly believes that issuing a digital security, an ICO, or an STO, will be substantially easier in the future.

Requirements For An ICO To Register With The SEC

When asked about registration, Mr. Hendricks commented on the complicated steps one must follow. It requires heavy paperwork, a law firm, good finances and months of time. However, Dave believes that most security token offerings made in the United States will probably actually not register but rather opt out for something called Reg which is exempt from registration. A Reg D is not an IPO and therefore not sold to the public at large, and so the registration requirements are far less onerous. Reg D offering is just what VC Round does, looking to gather tens of thousands of dollars.

Institutional Investors In The Crypto Market

From his perspective, Dave mentions that institutional investors are already quite involved in the crypto market. There are several hundred funds operating in the United States that are investing billions of dollars. Companies like Pantera, Galaxy Passport; all of these venture funds are well-established and they’ve got hundreds of millions, if not billions, of dollars under management. Dave believes once real-world assets are fractionalized and get tokenized that’s when folks will start getting excited about Bitcoin, Ethereum, and all the other cryptocurrencies that are out there, because they’ll want to use those for trading.

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Security Tokens VS ICO Tokens: Interview With Dave Hendricks