Zurich, 28 January 2020 – In the first ten months of 2019 more than 380 token offerings were settled as initial coin offerings (ICOs), security token offerings (STOs) or initial exchange offerings (IEO). This is shown in the sixth ICO/STO Report (Winter 2020 edition) by Strategy&, PwC’s strategy consulting team, in cooperation with the Crypto Valley Association Switzerland.
After the record year 2018, the global volume of tokens declined from January to October 2019 to USD 4.1 billion. “For crypto fundraising instruments to regain momentum, greater regulatory clarity is needed. In addition, offerors must upgrade their infrastructure, for example for exchanging tokens or for reliable market data,” explains Andreas Pratz, Partner Financial Services of Strategy&.
Global volume stagnant from mid-year
The market for digital assets grew solidly through the first half of 2019. As a result, market capitalisation reached a high of USD 370 billion at end-June. In the middle of the year the total fundraising volume of ICOs/STOs fell from around USD 1,322 million in May to USD 151 million in June. Up to end-October, the average monthly fundraising volume fluctuated around USD 171 million. For comparison, the monthly average from January to May 2019 was USD 653 million.
Specialising in fintech companies, the young cryptocurrency exchanges Bitfinex, Kinesis and GCBIB have advanced to the list of the Top 15 cryptocurrency platforms. In 2019 they earned together 32% of total token volume created since the start of the year. The IEO of Bitfinex (Hong Kong) was the biggest IEO of 2019, raising capital of USD 1 billion, while Kinesis (Cayman Islands) raised USD 194 million and GCBIB (United Arab Emirates) raised USD 143 million.
Switzerland is a European leader
As in the previous year, the USA, Singapore, Hong Kong and UK are the leading token hubs worldwide, in terms of both fundraising volume and the number of offerings. With 69 completed token offerings and USD 894 million, Switzerland ranked sixth in 2018. This makes it the joint European token hub leader alongside the UK. Countries with relatively small domestic financial centres, such as the British Virgin Islands, Cayman Islands, Estonia and Latvia, are still attractive locations for digital currency offerings.
Industry with great potential
There was no significant growth in STOs in 2019 in terms of either fundraising or the number of token offerings. In the second half of the year, there were virtually no STOs. Even so, they gained in relevance within the group of crypto fundraising instruments, particularly in comparison with tokens directly issued by companies and private placements. Security tokens have enormous potential, as they are an attractive alternative to conventional capital procurement. The STO industry is still young, but fit for the future.
In the last few years, numerous tokenisation companies with strong ecosystems have emerged, several of them in Switzerland. Jonas Heydasch, FinTech & Crypto Finance Expert at Strategy& and co-author of the study: “Switzerland is an outstanding location for tokenisation. It offers an innovative environment with strong links with technology, the best basis for a strong cryptofinance ecosystem.”
Initial exchange offerings growing dynamically
Despite the overall stagnation in token offerings from June to October 2019, IEOs have significantly increased their relative share in the number of all completed offerings. This growth indicates their advancing institutionalisation and definitive establishment as a fundraising instrument based on blockchains. IEOs are seen as a further development of ICOs and a format with maximum security. The three-party investment has firmly established itself in the crypto market over the past 12-18 months.
Dr. Günther Dobrauz
Partner and Leader Legal, PwC Switzerland
Tel: +41 58 792 14 97