STO

A Security Token Offering (STO) is an innovative way of fundraising in which a company issues digital tokens that represent the ownership rights. These rights might comprise company shares, equity, profit-sharing, or even physical asset claims like real estate. Security tokens are not the same as utility tokens, which only offer access to a product or service; rather, they are categorized as financial securities and are, therefore, heavily regulated. This means that they are required to fulfill the same legal obligations as conventional stocks or bonds.

Typically, an STO is conducted on a Blockchain network where the created tokens can be preset with automatic compliance rules. Investor qualification, transfer limitation, and sale allowed areas are among the possible rules. The aforementioned attributes endow security tokens with a lot of transparency and a lower likelihood of being hooked on fraud than the manual paper systems.

STOs are a favorite of companies today as they come with the advantages of a modern way of raising capital, and at the same time, are still legally compliant. As for investors, they are given the guarantee of enhanced protection, posited with unambiguous claims and they can also resell their tokens at digital asset exchanges licensed to trade such assets. Besides, tokenization allows fractional ownership, thereby facilitating small purchases of expensive assets by investors. In a nutshell, an STO connects blockchain’s technology, along with the security and stability of traditional finance. It supports the production of e-securities, which are compliant with the law, and makes them accessible to investors by way of tokenization.