Disclaimer: there are legitimate projects out there. This article is meant to provide some fundamental understanding of how to distinguish them from scams.
Nowadays, there is a lot of hype around Security Tokens. Security Token organizations, exchanges and especially tokenization corporations are popping up everywhere, and they are virtually all borderline scams as they claim/promise what they can’t fulfill (intentionally or not — the results can’t be distinguished from one).
They close to never get anything done.
Japan is a market with all a lot of unspoken rules, customs and vitamin-B type of relationships. Its corporate culture is infamous for bad management and especially problematic for investors: They are far more easily fooled in this environment.
A sparkly presentation, some buzzwords, big numbers, and millions are thrown at whatever Blockchain! AI! Decentralized Something! project it is.
“We decentralise…AI…Blockchain…ICO *ahem* STO! Tokens and stuff… much complicated, profitz soon! We just need 1–2–3 years and some millions”
If you answered this with a 6+ digit transaction you may be a big corporate or investor that should spend some time thinking about your decisions
Sounds utterly ridiculous? Happens all the time. And while it is especially bad in Japan, this is truly a global phenomenon for not only blockchain but really any tech-buzzword-start ups. Some are called unicorns for their supposed surrealism while others are better at disguising themselves as a realistic investment target.
They work hard, hire many people and eventually make it happen: the next seed/funding round that is.
There is no product, never will be.
Let’s look at an example in Japan: A supposedly tokenization/Security Token issuance platform. The webpage looks well designed and is full of big words and claims and even has a cinematic HD video that literally looks like a movie trailer.
“Ensuring investor protection and regulatory compliance.”
“ At present, the legal system regarding STO is undeveloped and unclear in Japan”
Interesting. First, we are put into a mindset of “what a great investment!” next thing we know there are no laws. Wild wild west!
All of this on the same page clearly showing that they have no idea what they are doing.
“Reducing fraud risks”
Further down on the still same page they note:
“… a kind of STO conducted by business-type funds under the current Japanese laws”
Even though there are no laws out yet? There has not been a single STO in Japan yet.
Don’t get it confused: There are some STO Platforms that have been able to raise investor money using conventional methods, but there has yet to be an actual Security Token Offering in Japan.
Yet they write “Legal Certainty”. Again, where are there even laws we hear so much about?
“Providing Technology: Providing resources by Blockchain, AI, IoT, and other ICT related companies.”
A lot of buzzwords. But what do AI and IoT have to do with any of this?
“We have developed the first fully legal STO solution in Japan to date.”
How can you be legal when there is literally no law?
“Currently, such market size is approx. 3.55 trillion JPY”
Where do those numbers come from? Who knows, they are big! And they may or may not grow if we use some random growth-formula-calculation-whatever on them, awesome! Let’s make some infographics out of it while we are at it. Profitz!
“In 2021, we will build a model for the de jure standards and functions in order to become a “Global Hub” from the Japan Security Token market.”
- What are you doing for 2 years?
- What standards and functions?
- Global Hub when Japan is one of the most difficult markets?
- I don’t even…
Common sense. Use common sense. If you don’t know much about technology, don’t just throw money at it. A shiny webpage does not equal a product. Successful projects start with a prototype, not a package for a product that does not exist and may never will.
About the author:
Vice President of the Security Token Alliance, the world’s largest think tank for the Security Token industry with over 100 partners, Advisor to the World Data Science Forum, and Brand Manager at both bitgrit and Cosmology Inc. Has reached audiences of millions on social media channels and is involved in a plethora of marketing campaigns.