What Is Security Token Offering (STO)?
STO is basically created for fund safety and fund raising for a new project. It stands for security token offering. The concept comes behind from the Initial Coin Offering ICOs. The concept comes from PolyMatch. In the past year 2017 ICO raise more than 5.6 billion. In general, to raise fund through initial coin offering they offered to buy their tokens. Those cryptocurrency token can exchange with ETH or BTC. You can imagine this token with a share.
For example, when you gain a share from any company, where the company have been regulated by government. Generally, they registered and have the rights and responsibility. This share gives you rights to the company like voting power also you get the company profits. So this Initial Coin Offering tokens give you access that network platform and services.
The security token offering is just like the initial coin offering. As usual like ICO you can participate on the STO and you can buy tokens during the security token offering. So you can sell, buy and trade on the exchanges. However, since this STO and obviously your token have a strong background as a real asset. For instant, this token like tangible assets, you are company share holder and get revenue every time.
Security Token Offerings on the Polymath platform
When an organization finished a security token on the polymath platform they assert you with some requirements. It’s gone through security and a technical procedure before issuance. This token ready completely with full KYC/ AML requirements. Also security laws and from any part of the world.
This new concept STO token create by Polymath’s ST-20 standard to protect any type of undesired trader person through robust smart contracts. It is stile SEC chairman, Jay Clayton, stated that all the ICO project should be securities. Polymath platform give opportunistic and insurance an automated way.
Security Token Offering Basic Need
Initially you need to insure about the token is under security. A little matter you should remember before consider as a security token. Security exchange commission (SEO) regulated by the SEC and government allow to raise funds in the legal way.
Many cryptocurrency enthusiasts think SEO is the big thing. It is the futures. The security token also makes a reasonable profit. SEO give right advantage of the network of voting.
Token Sale SEC Securities Laws
First in your mind come to a question about what make a token security? In USA one of the intention to invest with secirity system. The centennial case it indicated security and exchanges Commission v. Howey Co., 328 U.S. 293 (1946). Here are 4 thing.
- Investment type money or assert.
- Is it common enterprise investment.
- The expectation of investment profit.
- Profit arises from the third parties’ efforts.
Is The Token a Payment Instrument?
The definition of “security” is wide-ranging. underneath Section 2(a)(36) of the 1940 Act, a security suggests that, unless reported otherwise, “any note, stock, stock, security future, bond, debenture, proof of obligation, certificate of interest . . .“ the total definition will be found on-line. The 1933 and 1934’s act’s definition of a security is actually identical. basically, associate e-money or payment service will be thought of a security.
Does an Exemption Apply?
Even if the token falls below the definition of a security, there could also be AN exemption that applies. The exemption permits investors to issue the token, while not being referred to as a security and as a result, it wouldn’t be necessary to own a prospectus. the most effective thanks to confirm whether or not one’s token could be a security or if AN exemption applies is to talk to a securities skilled.
What are the differences between ICOs and STOs
There have many different, but most of the cases similar. However, before to find differences between STOs and ICOs you need to know about them. Basically, you need to understand ICO properly. A lot of ico projects are coming in the markets. ICO offer token to raise money for different project. This procedure organize by blockchain or most of the case ERC20 digital token. Unluckily, it is widely unregulated and investor has chance risk fund.
There is a big chance to get scams on the ICO projects. The many ICO project offers there token opportunities, but at the end they just scam. Honestly, it just happened-end for the lack of regulatory guidance. That’s why it is need a regulation by strong back-end. So, STO is difference because it is regulated.
STO Vs ICO
- Initial coin offering project purpose to raise fund. It is risky for unregulated. STO is pretty similar with ICO’s.
- STO reduce scam risk. ICO have chance for scamming.
- Security token raise money as an assert backed up. It is lack of an ico.
- Luck of rights. On the other hand, you will get voting power.
- STO is much transparent for both of individual and company.
- It’s need financial authorization and KYC but in ICO it is not mandatory.
- Major digital exchange are not support STO. Most of the exchange are support.
Crowdfunding And Regulation Friendly Blockchain
STO backbone and registration by Securities and Exchange Commission (SEC). Also get benefited as Reg A+ and it is one kind of company share. Every STO project has a read assert project. For example, a real-state psychical project. You can contribute as a company shareholder. You are also voting access.
STO give investor a security layer for their investment. It is one kind of Initial Public Offers (IPOs). It’s make a good sence of investor. STO has a transparency that pulls up the new investor on the cryptocurrency market.
Many crypto expert comment about STO and they are very excited. They are expected $10 trillion crypto market by 2020.