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Bitcoin news: Can security tokens save cryptocurrency? What are they? | Personal Finance | Finance

Bitcoin saw almost 17 percent wiped off its value in November at the end of a year-long slump which left investors reeling. After once being worth almost $20,000, BTC had fallen to $4,000 by the end of 2018. The token remains hovering about the $4,000 mark but there are fears the bear market could continue for months yet. 

The slump has been blamed on government regulatory plans, fraud and the irrelevancy of digital currencies on a day-to-day basis. 

But in recent weeks, cryptocurrency enthusiasts have been getting excited about security tokens and how they could reinvigorate the market.

Security tokens are securities such as stocks and bonds which can be used or “tokenised” on Blockchain, the trading platform for cryptocurrencies.

They hit the headlines this week after Estonia cryptocurrency company DX.Exchange launched a trading platform enabling investors to buy tokenised shares of NASDAQ companies.

Facebook and Apple are just a couple of the big companies with shares on offer.

Henry James, Deputy CEO & CSO of financial technology (fintech) and digital investment bank Fincross, says the change could drive new investors into the crypto market.

He told Express.co.uk: “I don’t expect we will see a rapid reversal of the 2018 sell-off in the crypto market.

“But I do believe that the growth of the security token market will support and drive the price of the crypto market in the long-term. 

“Bitcoin, altcoins and utility tokens will still be treated as non-correlated assets, but their value will most likely benefit from the security token market as they will function as a fast and efficient way for investors to hedge part of their security token investment portfolio.”

Mr James said investors “will be more familiar and comfortable” with security tokens directly linked to assets such as gold or oil meaning they are less “volatile”.

He said he expected security tokens “to form a much larger percentage of our clients’ digital asset investment portfolio compared to utility tokens”.

This does not mean they are without controversy – China banned their trading at the end of 2018.

Mr James said he believed “it will only be a matter of time before security tokens become legalised in China, even if it is under tighter regulatory control than other jurisdictions”.

And crypto experts agree with the predictions about security tokens.

Lex Soklin, partner and global director of fintech strategy at Autonomous Research told CNBC: “In terms of timing, we hear that mid-2019 is the time-frame when most STOs will be able to ramp into the market.

“Given a longer regulatory approval process for these assets (rather than none for ICOs), entrepreneurs have a slower path to market. But perhaps a more stable one.”

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