Why Security Tokens Can Change The Corporate Fundraising Landscape?
In the era of technological innovations, blockchain technology is bringing a revolution in every sphere of life. From cryptocurrencies, smart contracts to ICO and STO, etc blockchain technology is bringing new reforms to Financial markets. Being the spinal cord of the world economy, changes in financial markets will change the functioning of the economy as a whole. One of the profound effects of these innovations can be observed in the corporate fundraising landscape. With the advent of security tokens, a lot has changed in corporate fundraising. STO(Security Token Offering) has become the new fundraising vehicle for corporates. Many investors and fundraisers prefer STO over traditional fundraising methods and all thanks to the powerful benefits of STO over traditional methods.
Didn’t know why security tokens are overpowering the traditional corporate fundraising methods? Let’s find out now!
Before proceeding further, I want you to think from a user’s perspective, every day a lot of products launch in the market but only a few of them survive in the long run.
Do you know why?
Yes! You are right…
Those who serve greater value and benefits to consumers gradually replace their competitors in the market.
That’s a universal rule for every industry. Similarly, security tokens are also gradually replacing traditional corporate fundraising methods. Let’s have a quick look at the benefits of using Security tokens as a fundraising vehicle…
- Greater Liquidity: One of the very powerful benefits security token serves is greater liquidity. Unlike in traditional securities, investors can access multiple exchanges. Greater liquidity is a greater choice of freedom offered to stakeholders.
- Automated and efficient: Who will not prefer security tokens over traditional securities if they are smart enough to handle everything on their own. Yes, you read it right! As security tokens are smart contract based digitalized securities, these can self-execute the process of sending dividends, profit sharing, remittances, etc.
- Compliance at Asset level: STO(Security Token Offering) is heavily regulated unlike ICO(Initial Coin Offering) and regulatory standards are coded in the security token itself. Thus, compliance at the asset level as opposed to traditional securities where compliance is done on the exchange level.
Still not clear what does it mean? Let’s take an example!
If you are trading your security tokens with an unaccredited investor, the protocol automatically declines the trade and shows you the reason for trade failure. The protocol automatically takes care of all the compliance criteria. One doesn’t need to worry about compliance while trading.
4. Greater reach to potential investors and Fractional ownership:
As security tokens are fractionable i.e single security token can be divided into multiple tokens, it provides a great advantage to people who couldn’t afford to invest in expensive single unit investments. By investing through security tokens they can have partial/fractional ownership, thus it also helps the issuer to collect the funds from a wide spectrum of investors.
5. Quick settlement and transparent: Unlike traditional securities which are less transparent and usually take up to 3 days to settle, security tokens are completely transparent with instant settlement. Security tokens are 24/7 tradeable thus more accessible when compared to traditional securities.
After discussing the major benefits and features of security tokens that are the main force behind changing the corporate-fundraising landscape, we can say that security tokens have immense potential to replace traditional fundraising financial instruments. Through STO, fundraising will be cheaper and convenient than traditional methods like Initial public offering or Venture capital. After reviewing the potential of security tokens, It won’t be too early to say that the future of fundraising lies with the security token offering.