A market of tokens for investment funds: an idea to recover patience

A legal framework that regulates SANTOs for non-accredited investors is necessary

The lack of a legal framework that regulates an STOs market for non-accredited investors prevents us from making the leap towards the necessary liquidity tools. The tokenization of investment funds seems to be the way.

By definition, a venture capital (risk investment fund, or VC) is made up of private agreements that are not listed on the stock exchange. What does this mean? That they have very little liquidity, because until the exit of some of the investments takes place - in typical terms of seven to ten years - there is no such event that returns money to investors.

This structure always works in the long term and has absolute control by fund managers. It has its rules, its agreements and a very limited movement, where patience is the only ally when it comes to recovering the investment.

However, we are at the dawn of change. The proliferation of cryptocurrencies and their respective tokens created new exchange methods and market tools with intrinsic value. The problem is that there is not yet an exchange where a Security Token Offering (STO) can be made and where these traditional VC funds (previously previously tokenized) can go out to sell their tokens publicly.

To understand the concept of STO, it can be compared with a Public Offer of Shares (IPO, by its abbreviations in English, Initial Public Offering), where a company puts on sale a financial assets in bag for the first time. There, investors can buy and sell shares without any restriction. The objective of the STOs is similar, but what is being traded are shares of the companies represented by security tokens.

Unlike the ICOs (Initial Coin Offerings), which are not regulated and are at risk of fraud, the STOs operate in a financial framework that is regulated by the United States Securities and Exchange Commission (SEC). or similar entities from other countries. That's why we have to go a step further: creating a stock exchange - NASDAQ or NYSE style - would open the doors not only to accredited investors (with a million dollars' worth or more), but to anyone who wants to Acquire a share of a tokenized company. This market would comply with the laws and allow the public commercialization of these security tokens.

In this way, anyone could buy or sell their share - hence having more liquidity - without having to wait for traditional exits movements. Thus, the market is dynamic and gives transparency when setting the price of assets through supply and demand. As a result, this dynamic is effective for investors, while the general partners of the funds have more flexibility when looking for investments.

Volatility must also be taken into account as a risk metric on this path. Like any financial instrument, understanding risks and benefits is part of the process and the business model. After all, if the business is good, you probably earn money; if it is bad, the results will not be positive. The important thing is to understand that the tokenization with its respective regulation does not return to the business more liquid in itself, but it gives shape to a market to be liquid.
There is still a way to go and we know that the problem is not technological, but rather regulatory and cultural. Now the post has it the SEC, the National Securities Commission and the rest of the regulatory bodies. It's only a matter of time: once the road is marked, a new era for cryptocurrencies will begin.