Blockstate study on digital securities: Germany leads the way in issues in Europe

The analysis compares more than 200 companies associated with the security token ecosystem.  In addition to factors such as the current status of the blockchain technology used, types of security tokens, issuers and issuing platforms, the study also provides an overview of investors, secondary markets and involved “classical” financial players such as banks.

In contrast to the STO study published by Blockstate in July, the new report does not focus on invested capital, but on the actors involved in the STO ecosystem.


Particularly many issuers in Germany

Based on this criterion, two “epicenters” have established themselves over the years, according to the study with the USA and Europe.  The USA leads the industry with 89 identified players, closely followed by Europe with a total of 75 companies. The USA dominates the investor sector, Europe shows great strength in the area of emission providers.

In Europe itself, activity is concentrated in Germany, Switzerland and Malta, although there are now 10 companies in Germany with more issuers than in any other European country.

This is unlikely to change in the medium term, as the large wave of start-ups reached its high in 2018. In 2019 only a few new players entered the market, which is now likely to consolidate with increasing STO volumes.


Infrastructure: Private proof-of-stake instead of proof-of-work

As far as the technology used for security tokens is concerned, the market has meanwhile modernized. With a share of 94 percent, the STO ecosystem is still dominated by Ethereum. However, new STOs are also increasingly relying on private blockchain solutions to “respond to security and stability issues and serve large business customers. Blockstate-CTO Samuel Brack says:

“Most players in the security token value chain want to become blockchain independent and have a wide range of options to choose from. In the verification algorithm used for security tokens, issuers are now using predominantly modified versions of proof-of-stake. The usual proof-of-work algorithm is increasingly being left behind.”



As the authors of the study point out, so-called STO emission platforms are increasingly establishing themselves as issuers, as legal hurdles in the issue of security tokens continue to represent a major hurdle. According to Blockstate-CEO Paul Claudius, the European market for STOs is “still undersupplied” and therefore remains “relatively opaque”.

According to the study, only 16 out of 54 emission providers offer publicly available figures on borrowed funds and planned or executed STOs. The fact that security tokens cover a wide range of asset classes can already be clearly seen from the available information. In addition to equity and debt capital, this also includes real estate and funds, in which it is now possible to invest fully digitally via security tokens.


Investors: Not fixed on Blockchain

According to Blockstate CEO Paul Claudius, STOs have the potential “to become recurring products used by brokers such as securities.”

According to the study, the still new investment opportunity in the form of security tokens has now left the boundaries of their own ecosystem. 71 percent of all current investors are not fixed on blockchains, but “come from the traditional investment sector”.

From the perspective of the study, investors are “all actors who invest in the ecosystem” and thus every company “that has invested in a company whose focus is on security tokens and the associated services”.

According to surveys by Blockstate, the majority of investors (61 percent) come from the USA. With a global market share of 9 percent, Germany ranks second.


Secondary markets and banks

According to the study, there are hardly any secondary markets in the form of trading platforms on which security tokens can be traded for the still young segment of security tokens. 47 such platforms are currently under development. Only six providers offer live trading solutions to date.


The authors write about the associated legal problems:

“This category is strongly influenced by regulations and approval by the tax authorities. Many platforms claim to have an operational infrastructure that is only waiting for regulatory approval and is therefore still in the development phase. Countries such as Switzerland and Malta would still have a locational advantage here due to their “progressive legal situation in Europe”.


Even established financial players such as banks are increasingly positioning themselves in the security token ecosystem. However, Paul Claudius still sees a need for great potential added value through the adoption of the technology, especially among banks. This would be an indispensable step in the long term.