Security token offerings (STOs) share a few similarities with both ICOs and traditional securities. The unique crowdfunding strategy combines the high efficiency of the blockchain tech with the legal protections that are found in the standard securities offerings. Such crowdfunding creates a safer investment scenery for potential investors.
ICOs don’t really have legal requirements in most places in the world, and anyone can purchase the tokens without having to reveal their true identity. Companies don’t have to provide data about themselves either. This lack of regulation has led to increased fraud in the cryptosphere. Such fraudulent activities created a strong demand for more secure options. Here’s where STOs come into the picture.
Issuing securities via programmable code aka smart contracts on the blockchain comes with massive benefits for businesses that plan to tokenize their company’s equities. Here are the main benefits:
Security tokens are regulated financial securities, the same way as stocks are. People dealing with securities don’t have to worry about transparency or regulations.
Let’s take Amazon for instance. The company is basically a giant of e-commerce, but the company’s shareholders cannot do anything with their AMZN stock than trading. The same way, while traditional utility tokens cannot act as securities, security tokens CAN act as utilities. In other words, with the help of smart contracts, issuers can choose to use the security tokens as a payment method on their platform, network gateway, voting rights, loyalty programs and more.
With security tokens, issuers have got total control over creating more liquidities. This can be achieved by allowing not only international investors but also listing the securities on exchanges.
You can learn more details about the benefits that come with security tokens and how they can surpass utility tokens in terms of transparency, legal issues and more by heading over to the official website of securities.io.