How Security Token Offerings Could Drive the Crypto Markets in 2019
Who would have guessed that 2019 is the long awaited epic comeback of the Cryptocurrency era, right after the downfall of the Crypto fever on 2018 which was based on how the market has dropped to its 100 Billion mark. Since most individuals called it quits and declared crypto dead; it may have been true for many projects knowing it did not survive the liquidity crisis.
This expectation is dependent upon various key issues and obstructions being overcome, with the biggest obstacle being clear guidelines, STOs could drive the next wave of blockchain innovation. Now this is where the ingenious Security Token Offering (STO) comes in; numerous analysts believe that STO are actually the next big hit that could surpass Initial Coin Offering (ICO) back in 2017.
Cryptos were made convenient enough to be accessible to everyone regardless their economic stature, be that as it may, when the investors themselves got scammed, there was no good recourse to recuperate the assets lost. Existing strategies for raising capital are exceptionally prohibitive with respect to who can access it and what they can offer. However, security markets have experienced tons of trial and errors even hard lessons to build the investor’s protection protocols. The invention of Security tokens made it possible for everyone to access; tokenize assets while ensuring the protection of the investor by adhering to the Securities laws.
The buzz word in town is that Security Token Offering (STO) could actually revive the crypto market. Likewise, it might conjointly inaugurate a brand new era of innovation to the blockchain technology. The height of crypto valuation was throughout the peak of ICOs and STOs would possibly bring back the lost glory to this advance industry.
Practical use cases of conventional adoption cryptocurrencies up to now are speculation and as a store of value security tokens will surely change this status quo making a crypto a viable financial tool. It is conceivable that within a reasonable time-frame STOs could totally supplant ICOs.
How exactly is STO any better than ICO? To answer this, we first need to take a gander at the meaning of a security token or a security. Any Financial asset is considered a security just as that it passes the Howey test, and since ICOs change as per their role, highlight and purpose not all ICOs are securities but rather some are.
In order for a transaction to be considered as a security, it should meet the three conditions respectively. First off, it has to be an investment of money. Second, the investment should be held in a common enterprise, third, Profit from the work are expected by the promoters or the third party. However, any ICO that could meet the three may be considered as a security token.
For now, entrepreneurs whom invested in ICOs actually have no claim of ownership. The only thing speculating upon them is the hope of increase in demand and values the cryptos they have bought. But the for STOs, investors are granted ownership rights in the company, a right to vote, participate during company decisions, have dividends and sell their shares to those who deemed to have the same right.
How the current stock exchanges will react to STOs remain to be seen. It will depend on how regulators deal with STOs. One of the reasons ICOs escaped regulatory oversight was the fact that it was not a security. STOs are securities by definition hence they will have to face regulators head on. Security comes bundled with investor protection which means transparency, how to achieve that in a pseudo-anonymous platform like crypto is a challenge.
While there has been a ton of hope for the far reaching adoption of blockchain, the pragmatic use of the immense cryptocurrency is simply theoretical trading and potential store of value. STOs could be one of the key killers for the mainstream usage of blockchain and cryptocurrencies.
Only time will tell whether the STO could bring a monumental change to the crypto industry based from its early performance. Be that as it may, it will without a doubt draw more talent and cash to the developing innovation, helping it accomplish steadiness and development. Generally speaking, it is a positive improvement in the crypto space getting enormous financial specialists and establishments just as conquering any hindrance between traditional finance and the crypto world. How investors respond to these new tokens is something everybody should wait and watch.
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