The biggest threat for security tokens

The nine most terrifying words in the English language are: I’m from the government, and I’m here to help.– President Ronald Reagan

Reagan’s truism comes to mind when you look at how absurd government policies across the pond are hurting investors.

Regular readers know we at Curzio Research are beyond excited about the future of security tokens… 

If you’re new to this sector, security tokens are cryptocurrencies that are similar to equity. In other words, they’re like owning a stock. In many cases, token owners have equity ownership in a business and can receive dividends.

Security tokens (also called digital securities) are a much more efficient way to raise capital for a business, compared to Wall Street’s high-fee methods, like private equity or initial public offerings (IPOs). That’s why Frank Curzio raised capital through his own Curzio Equity Owners (CEO) token. 

Security tokens are a big improvement over utility tokens, which include the vast majority of cryptocurrencies on the market. As you probably know, most cryptocurrencies give investors zero ownership in the underlying business. Utility token owners have no legal claim to the profits of the business. In most cases, the only way to make money off utility tokens is to sell to someone else at a higher price than you paid.

Even though security tokens are a clear improvement for investors… we need to be patient as the industry takes off.

You see, the security token industry has a giant headwind… the government. 

A couple years ago, a company called Neufund made headlines as it conducted one of the first equity token offerings, raising over 3 million euros. Neufund is a German fintech startup that creates blockchain-based solutions focused on fundraising, investment services, and more. Its key asset is an investing platform that helps bring together investors and entrepreneurs. 

Neufund also became the first fintech company to conduct an initial public offering (IPO) using the blockchain.

But after countless meetings between entrepreneurs and politicians, Neufund decided to put aside its equity token offering project. Two weeks ago, the company announced it will freeze its fundraising activities as it looks to pivot in a different direction. 

This is a frustrating development for everyone excited about security tokens.

Nevertheless, it’s not a huge surprise. It’s the latest example of how governments all over the world are slow to act, inefficient, and a giant headwind to businesses. 

Despite Neufund’s troubles, I’m sure of one thing: security tokens aren’t going away.

Whenever a small company tries to disrupt an industry, it will always face massive obstacles. Nothing comes easy when you’re trying to change the status quo. 

Meanwhile, there are dozens of other companies working to create new exchanges, platforms, and other services focused on STOs. It’s only a matter of time before investors will have an easier time accessing this new asset class.

As an investor, don’t let the Neufund news detour you from security tokens. We can expect governments to continue to create headaches for small businesses. 

As one of the founders of Neufund, Zoe Adamovicz, summed up, “…the last months showed that financial authorities are not just slow, they are paralyzed with the fear of new technologies and avoid any dialogues or decisions hoping that someone else, like global corporations or other countries, would deal with it.” 

Other corporations and other countries are doing something about it. And those who embrace this new industry will reap the rewards. Projects are underway (and have been for a few years) to build exchanges, provide opportunities to raise capital, and do so in a less expensive, more efficient way.

Over the next few months, you’re going to hear a lot about this exciting industry and some incredible news on our own Curzio Equity Owners (CEO) token. For now, be patient. This industry could be a life-changing opportunity for many individual investors.

Daniel Creech is a Curzio Research analyst with over a decade of experience. He writes on macro trends, large- and small-cap stocks, and digital securities. He’s a regular contributor to Wall Street Unplugged, Curzio Crypto, Curzio Research Advisory, and The Dollar Stock Club.