The security token industry has been through a tumultuous journey in recent years, but it appears that it is finally starting to see the light at the end of the tunnel. The past year has seen an influx of investment and large institutions entering the security token market, signaling a change of winds for the industry.

The security token industry saw a boom in 2017, with multiple token issuance platforms issuing security tokens globally. However, this initial boom was short-lived as people began to realize that issuing a security token alone was not enough. There were no trading venues or licensed custodians to safely keep these assets. This lack of infrastructure caused the industry to stall for several years.

But in 2021, the tide began to turn. Large traditional financial institutions have started investing in security tokens infrastructure globally. For example, Securitize raised $48 million in Series B capital co-led by Morgan Stanley Tactical Value and Blockchain Capital. DBS launched a digital bond issuance platform to ease capital markets access. Singapore Exchange-backed digital securities platform iSTOX raised $50 million in Series A funding. UOB is piloting a digital bond offering on Marketnode.

These are just a few examples of recent investments in the security token space. The industry is developing rapidly, and the notion that security tokens are dead is entirely false. The size and amount of institutional investment is signaling a change of winds in the security token market, and we expect to see exponential growth in the industry moving forward.

In addition to investments in security token infrastructure, we are also seeing traditional financial institutions entering the digital asset custodian space. State Street announced the launch of a digital asset division, Nomura-backed digital asset custodian Komainu raised $25 million, and Citi has been selected by BondEvalue to act as a custodian for the underlying bonds traded on its digital exchange as fractionalized assets.

The entry of large institutional players into the security token market is a positive sign for the industry. These institutions bring with them a wealth of experience and resources that will help to develop and stabilize the market. They also bring a level of trust and credibility that will help to attract more mainstream investors to the market.

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Why are these players looking into security tokens?

Security tokens are just a better technology, they come with a lot of benefits and the institutions has taken notice.

1. Increased Liquidity: Security tokens provide increased liquidity compared to traditional securities as they can be traded 24/7 on decentralized exchanges.
2. Increased Transparency: Security tokens provide a higher level of transparency and traceability, as all transactions are recorded on the blockchain.
3. Improved Efficiency: Security tokens can automate many of the manual processes involved in traditional securities trading, leading to improved efficiency and cost savings.
4. Global Access: Security tokens can be traded globally, providing access to a larger pool of investors and capital.
5. Compliance: Security tokens can be programmed with smart contracts that automatically enforce compliance with regulations, reducing the need for manual compliance checks.
6. Fractional Ownership: Security tokens can represent fractional ownership of assets, such as real estate or fine art, making it possible for smaller investors to participate.
7. 24/7 Trading: Security tokens can be traded 24/7 on decentralized exchanges, providing greater flexibility for investors.
8. Lower Costs: Security tokens can reduce the costs associated with issuing and trading securities, as many of the manual processes involved in traditional securities trading can be automated.
9. Faster Settlement: Security token transactions can be settled almost instantly, reducing the time required to complete a trade.
10. Increased Security: Security tokens are stored on the blockchain, providing a higher level of security compared to traditional securities.

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In conclusion, the security token industry is finally starting to see the institutional adoption it needs to take the next step in its evolution. With large financial institutions investing in infrastructure and digital asset custodians, we can expect to see exponential growth in the industry moving forward. The future is bright for the security token market, and we can't wait to see what it holds.