Enter The Security Token Offering (STO)
In the world of finance the ICO might be the most polarizing three letters of 2018. In the past three years over US$5B has been raised via ICOs. Some investors got rich while many others did not. With the SEC recently stepping up its pressure on ICO issuers, companies are scrambling to find three new letters to distance themselves from what will probably go down in history as a black eye moment for crypto currencies.
Enter the STO — the Security Token Offering
The term ICO does not distinguish what class of token is being offered. Many ICO issuers decided to issue Utility Tokens, which in theory cleared them from having to go through costly and complicated compliance measures, but in fact almost all utility token ICOs are considered by regulatory bodies to actually be Securities, which means a large number of Utility Token issuers will be heavily scrutinized by regulators like the SEC. In fact, the SEC has gone as far as saying the following:
“I believe every ICO I’ve seen is a security” Securities and Exchange Commission chairman Jay Clayton
On the other hand, Security Tokens, and Security Token Offerings (STOs), are treated as securities from day one. They are digital assets that are subject to federal and global security regulations. It’s an important distinction, and one that has the mainstream media confused about the true value of distributed ledger technology like blockchains vs. the price of Bitcoin.
Security Tokens and STOs are game changers for financial and ownership models, allowing any company to offer equity, debt or dividends. Any fund — be it, venture capital, hedge or private equity — can offer liquidity. Any asset can offer full or partial ownership or revenue shares. Security Tokens are better than all traditional models because they are liquid, secure, virtually incorruptible, and accessible to trade by anyone with an internet connection, including mobile.
If cryptocurrencies like Bitcoin are considered “programmable money” then you can consider Security Tokens a version of “programmable ownership.”
Anthony Pompliano — The Official Guide To Tokenized Securities
As obvious as it is for companies to migrate ownership models into Security Tokens, it’s not as easy as just flipping a switch. Security Tokens by definition are securities, and as such are subject to stringent regulatory oversight. Proper management of an STO requires an in depth and active mastery of global security laws and regulations, not to mention a team of programers to create smart contracts, digital wallets, and a platform for managing the whole process throughout the life-cycle of the token since you need to continue providing compliance post issuance and during secondary market trading.
Enter Securitize, the world’s first turnkey white-label solution for tokenization of securities of real-estate, funds, companies, and other assets. Securitize manages the processing of the solicited investors from login to capital received, as well as the issuance and management of security tokens throughout the lifetime of the asset.
Securitize recently launched a successful STO for SPiCE VC, a tokenized VC fund where token holders are entitled to the full net revenues of future exits.
22X Fund is another early example. The 22X Fund is the brainchild of 30 startup founders from Batch 22 of 500 Startups Accelerator program, and Securitize co-founder Tim Reynders. The 22X Fund token (22X Token) gives the benefits of traditional venture investing e.g. diversifying investment across companies to lower investment risk, while at the same time reducing the carried interest and management fees that eat away at investor returns. In addition, the token also provides liquidity by allowing investors to buy and sell the tokens from each other.
Securitize has successfully announced enabling STOs for a number of additional companies, including Lottery.com, VRBex, Monetizr.io and Realecoin that have either launch or are the in process of doing so. To date STOs targeting over half a billion dollars are already using the Securitize platform, with many more announcements to come.
