ABSTRACT
Security Token Offerings (STOs) are a very recent
phenomenon that has
started to replace the
Initial Coin Offering (ICO) one for
financing companies through blockchain networks. Contrary to ICOs, which are based on “utility
tokens”, STOs issue “security tokens” that are likely to achieve revenues in the same
way that bonds or shares do. However, because they utilize the blockchain network,
they are expected to benefit from lower intermediary and transaction costs. The objective of
this paper is to examine, for the first time in financial research, to what
extent this nascent market can become a liquid one, adapted for small and
medium-sized enterprises (SMEs). To address this still unexplored issue, we proceed in two stages. First,
we develop
the technical characteristics of security tokens. Then, we analyze the trading volumes of a
very few ones, although it has proved difficult to conduct a relevant empirical
analysis. Our
results are that, as for ICOs, the
technical nature of security tokens can greatly facilitate their listing and
exchange. However,
there are significant disparities in their use and, for the moment, most of
them remain locked in the wallet of so-called accredited investors. As a
result, the potential of the blockchain-based equity market is still uncertain:
STOs are likely to represent a growing and liquid alternative to IPOs, private
equity and crowd funding to
finance SMEs. Nevertheless, the liquidity of their digital assets strongly depends on the quality of
their issuers and on the existence of specialized trading platforms.