Wall Street is good at managing through disruption as it is a dynamic, competitive ecosystem not a group think hierarchy. There will be some Wall Street firms that seize the opportunities from disruption, while other firms suffer a Blockbuster/Kodak type fate. Some Wall Street firms are coopting Direct Listings and we can expect some Wall Street firms to coopt Security Tokens. Whatever happens we can be very confident that the future of Capital Markets will be totally different from the past. In this post we aim to work out where the puck is headed.
The Capital Markets past met the needs of four key players:
- The Silicon Valley VC Funds who invested early in disruptive ventures aka Wall Street West.
- The entrepreneurs building those disruptive ventures.
- The Investment Bankers who managed the IPO of those disruptive ventures aka Wall Street East.
- Investors buying at IPO.
Everybody on the inside connected to those four key players did very well.
In 2017 we had the ICO explosion, well documented on Daily Fintech, which was the revolt of everybody excluded from that lucrative game. Most ICOs did not end well, suffering from legal problems, scams and irrational exuberance. However ICOs got a lot of support at first because they were aiming to fix a deeply broken system.
Today – in the present – we see a lot of Capital Markets innovation that such as:
- Crowdfunding = disruption to Wall Street West at the early stage.
- Direct Listing = a bigger piece of the pie for Wall Street West and a smaller piece of the pie for Wall Street East.
- SPACS = entrepreneurs bye-passing both Wall Street East & West.
Where the puck is headed – the future of Capital Markets- is Security Tokens. ICOs were like Napster (illegal and free and in the dustbin of history but aiming at a big broken market) and Security Tokens are like iTunes and Spotify (low price and legal going after that same big broken market). Yes, low price and legal is the model that created many huge businesses. Security Tokens combine the technical advantaqes with regulated safety of IPOs and Direct Listings.
As always both the past and future are with us today – just unevenly distributed.
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