TokenReporter: What's an STO?
|John Biggs||Feb 19, 2019|
This week we’re going to start digging out from under the bear market and talk about the next big thing in the crypto space: the STO.
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Over the past few years folks trying to get projects funded via tokens walked one of two paths. In some cases, they attempted to create so-called utility tokens, tokens that had no monetary value outside of a closed system. These tokens, designed to skirt SEC regulations regarding securities, were a close but no cigar.
Other companies tried to create security tokens, essentially pieces of equity that, in theory, promised a price increase. Sometimes token floggers would launch one type of token and then release another or they’d tell the world - in a very wink wink way - that they were selling utility tokens but they were more than likely to go up in value.
ICOs, historically, offered nothing. They offered no voting rights, no rights of control, and they were not connected to the success of a business. The primary goal for ICO investors was the dead cat bounce - the moment when the ICO price doubled just before the initial investors pulled out.
A Security Token Offering is different. These are actual securities and they are backed by assets, profits, or revenue. This means a company is assuming that it will exist past the heady early days of ICO success.
STO tokens are also required to be compliant with KYC/AML requirements as well as securities law. They are, to a degree, just like standard stock certificates but digitized to a degree unfathomable to current equities traders.
Further, there are a number of built-in standards that ensure only certain people are able to trade them. While this might seem a bit heavy-handed, the goal is to reduce securities crime and ensure that the STO stays legal.
STOs are, in short, a quick way to go “public.” In a very real sense the STO is the next stage of IPO creation and should definitely be on your radar this year. While the technology isn’t quite mainstream, the ability to buy and sell liquid STO tokens will change the game for many startups.
We’ll be covering these concepts more over the next few weeks and hopefully bring you some solid companies doing solid work in the space.