What Is Security Token Offering (STO)?
STO is basically created to fund safety and fundraising for a new project. It stands for security token offering. The concept comes behind 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 funds through initial coin offering they offered to buy their tokens. Those cryptocurrency tokens 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 has been regulated by the government. Generally, they are registered and have rights and responsibilities. This share gives you rights to the company like voting power also you get the company profits. So these Initial Coin Offering tokens give you access to 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 an instant, this token is like tangible assets, you are a company shareholder 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 is ready completely with full KYC/ AML requirements. Also security laws and from any part of the world.
This new concept STO token creates 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 projects should be securities. Polymath platform gives opportunistic and insurance an automated way.
Security Token Offering Basic Need
Initially, you need to ensure 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 allows raising funds in a legal way.
Many cryptocurrency enthusiasts think SEO is the big thing. It is the future. The security token also makes a reasonable profit. SEO gives the right advantage of the network of voting.
Token Sale SEC Securities Laws
First, in your mind comes a question about what makes token security? In the USA one of the intentions is to invest in the security system. The centennial case indicated security and exchanges Commission v. Howey Co., 328 U.S. 293 (1946). Here are 4 things.
- Investment type money or assert.
- Is it a 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, 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 security is actually identical. basically, associate e-money or payment service will be thought of as security.
Does an Exemption Apply?
Even if the token falls below the definition of 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 confirming whether or not one’s token could be a security or if AN exemption applies is to talk to securities skilled.
What are the differences between ICOs and STOs?
There have many differences, but most of the cases are similar. However, before finding 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 into the markets. ICO offers tokens to raise money for a different project. This procedure organizes 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 to the lack of regulatory guidance. That’s why it needs regulation by a strong back-end. So, STO is different because it is regulated.
STO Vs ICO
- Initial coin offering project purpose to raise funds. It is risky for unregulated. STO is pretty similar to ICO’s.
- STO reduces scam risk. ICO has a chance for scamming.
- Security token raises money as an assert backed up. It lacks an ICO.
- Luck of rights. On the other hand, you will get voting power.
- STO is much transparent for both individuals and companies.
- It’s need financial authorization and KYC but in ICO it is not mandatory.
- Major digital exchanges do not support STO. Most of the exchanges 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-estate psychical project. You can contribute as a company shareholder. You are also voting access.
STO gives the investor a security layer for their investment. It is one kind of Initial Public Offers (IPOs). It makes a good sense of investors. STO has a transparency that pulls up the new investor on the cryptocurrency market.
Many crypto experts comment about STO and they are very excited. They are expected $10 trillion crypto market by 2020.