About STO token

Tokens and ICO — one of a new fund raising forms that has resulted from the cryptocurrency market evolvement — attract closer attention lately. A logical direction of development of the market transparency and the industry as a whole is introduction of a new investment method — Security Token Offering, or STO. So why is this tool is so special and why doesn’t it penetrate the market?

Over the past two years, blockchain start-ups have raised substantial sums of money using ICO. Companies recourse to ICO for selling tokens instead of stocks. Thus, they get financing from several sources at once. However, purchasing of digital assets doesn’t mean that the buyer becomes a full-fledged investor — he just possesses the right to use them as means of payment or offer them on the market.

STO token is considered to be an investment; it completely conforms to the securities legislation requirements. The tool provides investors with more reliable security level and investors — with lower regulatory risks. The companies that emit security tokens are subject to additional accounting submission requirements. The token is intended to be sold by professional investors, since being one of securities types. Since ICO is just a type of crowdfunding.

However, most blockchain start-ups see no rationale for initiating STO, since it requires a large batch of documents, as well as correspondence with recording procedures. When choosing jurisdiction, the emitter have to study out regulatory requirements and legislative details. Moreover, he has to be ready to incur substantial expenses on legal services.

However, despite all the costs, STO has a number of advantages:
• Low fee. As a general rule, the fee is paid to intermediaries who take part in financial operations. They include brokers and bankers. Security tokens require no intermediaries; all the processes are performed automatically regardless of human factor: signature collection or cheque mailing.
• Quick transactions. This factor is also related to intermediaries: the fewer people participate in the transaction, the quicker it is. At the same time, transactions are regulated by smart contracts, which make tokens an attractive investment both for investments and emitters.
• Transactions are performed automatically. Usually the services are rendered by lawyers; but when it comes to security tokens, these functions are performed automatically using special software. The lawyers’ key task will be providing the clients with consulting services.
• Growing number of investors. Financial markets will be provided with effective competition and profit due to an opportunity to broaden the potential investors base all over the world.

To implement this new market tool massively, joint efforts on the part of regulators and investors will be required. Moreover, decline in the cryptocurrency market results in substantial drop in the development process of security token.