Study: Europe has the Largest Security Token Ecosystem in the World

Study: Europe has the Largest Security Token Ecosystem in the World

The Frankfurt School Blockchain Center teamed up with BlockState to identify emerging trends among the nascent security token industry. Their research suggests Europe currently has the largest security token ecosystem in the world, with more companies than any other jurisdiction. The United States leads the space in other categories however, to include quantity of STOs and total volume raised.

Global Trends for the Security Token Industry Explained

According to the study, both Europe and the United States are at the forefront of the security token industry.

Europe features a total of 88 companies in the space, with the United States (U.S.) not far behind with 83.

The U.S. leads in total volume raised, quantity of Security Token Offerings (STOs), and number of issuance providers, however.

Different types of incorporations included infrastructure, issuance providers, investors, and secondary market platforms. In 2018, there were a total of 21 issuance provider incorporations— the highest of the four categories.

In terms of infrastructure providers, public blockchains represent an overwhelming majority of protocols used, since the industry has heavily relied on Ethereum. Private blockchains are on the rise however, constituting a total of 32% of protocols used.

Issuance providers offer services to tokenize a wide range of assets. The most common asset is equity with 19 issuance providers, followed by real estate with 16, debt/loan/bond also with 16, and funds with 13.

When it comes to investors, 71% are traditional investors. Notably, a mere 5 out of 69 total investors have invested in more than one security token company. 61% of all investors are based in the U.S.

The study also noted a significant gap when it comes to secondary markets for security tokens. While there is a total of 53 secondary market platforms, only six feature operational, regulated trading services.

While added liquidity is a loudly touted benefit in the tokenization of securities, compliant secondary market trading platforms are the foundation of that liquidity. Several are currently in development, including Archax, OpenFinance Network, tZERO, AirSwap, and Templum.

What do you think about the current state of the global security token ecosystem? How long will it take for regulated secondary market trading platforms to facilitate the added liquidity brought by tokenization? Let us know what you think in the comments section below.

Image courtesy of BlockState.