Is Asia ready to trade shares and real estate in tokens?

Since ICOs grew in popularity in 2017, Security Token Offerings (STOs) have been described as the ’next big thing‘. Can STOs finally deliver on their promise with a perfect mix of traditional financial instruments, regulatory clarity and support from one of Asia’s most prominent banks?

STO goes beyond the ICO
DBS is the largest bank in South-East Asia with a market capitalisation of USD 47 billion and a presence in six countries, including China and India. Last month, DBS accidentally announced their forthcoming Digital Exchange, which will 1k Daily Profit include STO and custody services for all their customers. This will make DBS the first major investment, corporate and retail bank to offer digital asset services to customers.

STOs will be able to attract institutional investment where ICOs cannot. STOs comply with government regulations while tapping securities on an underlying asset, such as shares, bonds, special purpose vehicles or real estate. STOs have a huge potential market in South-East Asia alone, with more than 650 million people living in different countries.

Huge market potential
The market share of private funding exceeds public funding with equity. Pools of private equity, private debt, and unlisted real estate and hedge fund assets grew by + 44% globally between 2015 and 2019. At the same time, many Asian countries in the southeast are under-served by public equity markets.

Indonesia, with a population of 270 million, saw only USD 1 billion in IPO fundraising per year during that period. This was not due to a lack of required capital, but to the inability to tap traditional capital markets and match investors with available investment opportunities.

Important role of STO
Occasionally we see the window of capital markets opening in the stock markets of South-East Asia. In Malaysia (2017) and Vietnam (2018) fundraising with equity increased 6 times and 14 times respectively compared to the previous year.

The largest part of the ASEAN economy is made up of small and medium-sized enterprises (SMEs), accounting for between 89% and 99% of total activity. New financing channels and methods suitable for SMEs are needed and STOs can help to fulfil this role.

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