Security Token Offerings
Security Token Offerings (STO) is a form of fundraising in blockchain industries. [1]
Difference between ICO and STO[edit]
Tokenized securities are shares of companies. The main difference between them and utility and payment tokens is that the owners of tokenized shares have the property rights, when the and payment tokens act like coupons and doesn't give their owners the traditional investors' rights.
Tokenized shares – is a subcategory of security tokens, which constitute ownership of such asset, for example, debt or equity.
To determine if a digital token is a tokenized share - the Howey test is used (approved by SEC). It is used to find out if a deal can be classified as an «investment contract».
The token must match the following requirements to be classified as an investment contract:
- The user invests money;
- The user expects to make a profit from investment;
- Investments are in «common ownership»;
- The owner receives profit from the actions of strangers (not organizers) or promoters.
According to the document published by SEC, all of the ICO's must complete the registration procedure. It is expected that security tokens and security token offering will become the next trend in cryptography.
Security tokens are subject to Federal securities rules and take effect on the first day of STO[2][3].
STO requirements[edit]
According to the rules which are planned to be entered by SEC, the STO investors must respond at least one of the following requirements:
- Yearly profit 200 000 dollars US for a single person or 300 000 dollars US for a married couple, maintained for the last two years and projected for the year in which a person plans to invest[4];
- Net assets of more than US $ 1 million, which do not include the value of the property in which the investor lives on a permanent basis;
- An organization with assets of more than $ 5 million, including venture capital and trust funds;
- An organization whose members are all accredited investors.
STO Advantages and disadvantages[edit]
- Advantages
- Lower fees comparing to traditional investments;
- Quick transactions due to the absence of a long chain of intermediaries;
- Increasing of the investors base;
- Automated transactions;
- Disadvantages
- The functions of financial institutions are vested in the parties to investment transactions;
- Reduction of decentralization, inaccessibility for most of ordinary users.
Development[edit]
The development of STO began at the end of 2017 – start of 2018. Overstock.com and Polymath became the first services in the world to work with tokenized shares[5][6][7].
See also[edit]
References[edit]
- ↑ "Security Token Offerings (STOs) – The Future Of Fundraising In The Blockchain Industry". investinblockchain.com.
- ↑ Michael K. Spencer (2018-05-10). "Security Token Offerings — STOs are the new ICOs". Medium. Retrieved 2018-12-20.
- ↑ Adrian Lai (2018-11-26). "Is STO replacing ICO as the 'new sexy' in the cryptocurrency community?". South China Morning Post. Retrieved 2018-12-20.
- ↑ Xing Loong Lim, Yingyu Wang. "Security Token Offerings (STO)s: A perfect marriage or a fleeting fantasy?". Lexology. Retrieved 2018-12-20.
- ↑ Ana Alexandre (2018-08-07). "Overstock's tZERO Closes Its Security Token Offering Tonight". Cointelegraph. Retrieved 2018-12-20.
- ↑ "В 2018 году вместо ICO будет проводиться STO – новый способ краудфандинга с помощью криптовалют" (in русский). sharespro.ru. 2018-05-03. Retrieved 2018-12-20.
- ↑ "Polymath: Detailed review on the project". Medium. 2018-10-02. Retrieved 2018-12-20.
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