What Is A Security Token Offering (STO)?

11개월 전

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The Next Step in Token Development

Security Token Offering, or STO, share similarities with an initial coin offering or ICO and legacy securities. But more than that, a security token is a crowdfunding strategy that represents an investment contract linked to underlying assets such as stocks and bonds, funds, and also real estate investment trusts (REIT). A security is a fungible and negotiable financial instrument holding a type of monetary value. It means that the investment product is subsidized by real-world asset values such as a property or a company. A security token best represents the ownership information of an investment product that is forever recorded on a blockchain. Ownership information in traditional stocks is printed on a document and issued as a virtual certificate, like a PDF. It is the same with STOs, only that it is documented on a blockchain and issued as a security token. We can conclude that an STO is a hybrid solution between an ICO and an IPO because of both share commonalities as to how STOs function. As it adopts legal protections mainly found in traditional securities offerings, STOs offer a safer investment atmosphere for investors.

The Need for Security Token Offerings

Security Token Offerings were born out of investors’ demand for more secure options after the ICO debacle of 2017 where 80% of ICOs launched were fraudulent. Most countries at that time did not have any regulation for ICO hosting. Anybody can just purchase tokens anonymously while companies need not reveal any information. Transference requirements were non-existent among tokens and burnt investors have no legal entity to turn to for their losses. STOs were invented following this.

The Invention of Security Token Offerings

The wild swings that crypto markets were known to be led developers to invent a token with the Securities and Exchange Commission in mind as a legal protection feature. STO-producing companies are obliged to comply with ATS registration together with the proper broker-dealer requirements. Companies now need to have a legal name, address, team members, and other financial information. All information will then undergo a series of process approval to confirm that all entries are accurate and true. In contrast with ICOs without checks and balances, STOs are proving themselves more credible among wary investors for better and safer investment opportunities.

The First STO

Blockchain Capital launched the first-ever security token offering on April 10, 2017 raising a staggering $10,000,000,000 in just a day. STOs since then began to gain traction up to this date.

AML/KYC Standards

Security coins are under the laws of the Know-your Customer (KYC) and Anti-Money Laundering (AML) procedures. These are standard practices within the STO environment wherein both investors and companies must disclose their true identities before any transaction occurs. There are strong indications that it won’t be long before crypto services will soon follow through.

STO Benefits

STOs offer investors great benefits while storing tokens of an exchange platform. They can gain voting rights, dividends, and revenue shares, among others. you are sure to be investing in a security token when the ICO you have invested on is offering these. features. Just don’t fail to check it out that the token is SEC-registered before going all out.

STO’s blockchain-based structure will eliminate the need for layers of intermediaries, lowering fees in the process, and reducing manipulation as well. What’s more, it can be programmed and enforced through smart contracts, giving it universal access compared to limited traditional securities.

Conclusion

With the influx of legacy institutions into the crypto ecosystem seeking future revenues, expect security token offerings to rise and shine and flourish. STOs are out to restore credibility and order after the chaos generated by ICOs victimizing hapless investors stuck with useless tokens, and projects failing to deliver on their promises. STOs, would like to set the record straight. For their part, they will be under regulation, with a fair and true valuation of tokens.

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