STO (Security Token Offering)

The acronym STO stands for Security Token Offering, which is an increasingly important term in the financial world. STO is the process by which crypto tokens are issued to investors.

STO enables digital financing while still complying with government regulations. These tokens are subject to extensive regulations, so they are not traded on regular exchanges but rather on STO exchanges, where information is recorded on public blockchains.

This process is often seen as a hybrid approach between the so-called Initial Coin Offering (ICO) and the more traditional Initial Public Offering (IPO) for shares.

What is a Security Token Offering?

A Security Token Offering is a public event where tokens are sold through cryptocurrency exchanges. The tokens can then be used to trade real financial assets such as shares. STOs have already been used in many investment scenarios and are being enthusiastically adopted by mainstream and institutional investors.

Security Token Offering vs Initial Coin Offering

STOs and ICOs essentially follow the same procedure. They represent an initial token distribution with a specific investment mechanism. They differ mainly in the characteristics of the offered token.

STOs are asset-backed and fully regulatory compliant offerings. On the other hand, ICO tokens offer access to a native platform and decentralized applications. ICO tokens are primarily intended for use rather than investment.

Security Token Offering vs Initial Public Offering

STOs also have similarities to IPOs and are often considered a hybrid between ICOs and IPOs. The biggest difference between STOs and IPOs is that STOs issue tokens on the blockchain, while IPOs issue share certificates on traditional markets.

An IPO is the process by which a private company first offers shares to the public. Both STOs and IPOs can represent an investment in a company, but STOs have more flexibility and the digital token obtained is recorded on the blockchain.

PROs

• Less risky than ICOs and IPOs because they are protected by securities laws
• Backed by real-world assets, i.e., it is easier to judge whether the token price has been determined accurately
• Cheaper because the way they are structured allows you to avoid intermediaries such as banks and brokers

CONs

• Cannot be owned by non-accredited investors, making them significantly less accessible than traditional blockchain offerings
• Tradable only on the secondary market, which does not apply to similar tokens
• Once the STO process has started, we can only trade STO tokens for a predetermined period

The STO security token concept is a good option for investors to gain access to blockchain assets in a fully regulated environment.

Conclusion

A wide variety of STO tokens from different parts of the world are already available. However, the US has become the market leader in the area and therefore many of the best tokens come from the United States. These include SPiCE VC, Blockchain Capital and Protos. Lists of all STO cryptocurrencies are publicly available.