Converging Traditional Security & Modern Blockchain — STO Exchange
By Scott Macy on The Capital
Security token offerings, or STO as it is commonly abbreviated, is considered to be the perfect bridge between the traditional world of legally viable financial assets and the new age technology — blockchain. It helps in capitalizing on the goodness of its predecessor — the initial coin offering — but at the same time, eliminates all the misgivings that made it dubious.
The presence of the word “security” brings it under the purview of the securities and exchanges commission (SEC) and its rules and regulations. The inclusion of the influence of the regulatory body has strengthened its stance as a viable investment option and is slowly gaining momentum among reputed financial institutions and investors.
A security token exchange is bound to a lot of revenue across the globe as it makes the investment more accessible to everyone all around the planet. It simply means that any person with an Internet connection who meet the capital requirement can be an investor.
Benefits of STOs
Security tokens are quite similar to the traditional securities but are more flexible towards accommodating illiquid assets like real estate and mining repositories. They open up a wide array of advantages.
- Enhance liquidity — it is quite known that startup equity, collectible art, real estate, and a lot of other viable investment options are illiquid to start with. Bringing in tokenization ensures that these assets are broken down into small, affordable tokens that anyone can buy. This not only ensures a diverse portfolio of investment but also makes the asset a lot more liquid than what it originally was!
- Transparency — blockchain technology, by default, is transparent and open. It is quite an oxymoronic combination to have both security and transparency together.
- Round the clock availability — there is no restriction when it comes to the operating hours of the blockchain. The concept is global and is always available. What adds to this element of awesomeness is that the transactions are almost immediate. The real-world problems like banking operations and delays in wire transfer do not affect the speed of transactions in a blockchain.
- Programmable — Legacy stocks were always confined to a single utility. Bringing in blockchain can diversify the utility of your tokens. You can use your tokens to automate corporate governance, proxy voting rights, and even to pay out dividends.
Below what meets the eye, security tokens have the capacity to disrupt the crypto market in multiple ways.
Since the tokens allow the programmable compliance protocols to be embedded into the actual asset, there is no limit to the number of rules and systems that can drive an STO.
The chances of fraud and money-laundering are directly proportional to the number of mediators. Eliminating the mediators greatly reduces the chances of corruption and manipulation.
STOs, in the long run, can help increase the magnitude of trust in cryptocurrency. This would bring in new market players and capital. Right now, the notion of cryptocurrency is limited to bitcoin. However, with the introduction of STOs, there are chances that new crypto coins will evolve over time.
Needless to say, the regulated and tokenized investment ecosystem is surely a revolution. A wider acceptance of STOs will result in the expansion of investment opportunities and an increase in returns.
Introducing security token exchange
Security token exchange is an alternative trading system that functions as a broker-dealer for the buying and selling of securities. Security token exchanges need to have the approval from SEC just like any other alternative trading system.
Features of security token exchange
Security token exchange should have a powerful matching engine to connect buyers and sellers without wasting a lot of time. It should also have a secure hot wallet for the buyers and sellers to store, receive, and send their security token. Using multiple signatures to validate the authenticity of a user can help in enhancing security.
Just like any other SEC-compliant ecosystem, STOs need to comply with the norms of KYC and AML verification. This goes a long way in eliminating the instances of fraudulent transactions.
It should be flexible enough to accommodate multiple currencies and should also be able to accommodate cryptocurrency as and when it evolves. The payment gateway should also be flexible enough to accommodate all these types of currency.
Creating your own security token exchange
Any innovation that is at a nascent stage requires quite a lot of expertise and understanding of the market. The same goes for any security token exchange. You will need to get connected with security token exchange development companies that have exhibited expertise in building exchanges and in creating STOs, so you know that your project is in the right hands.
