According to various researches, it has been found that the ICO (Initial Coin Offering) has seen a declination of more than 90% since the 2018 beginning. The reason is the lack of regulations and cases of fraudsters. To overcome the issue, the concept of security tokens emerged in 2018 that allowed companies to raise funds legally from accredited investors.
STOs are easy, secure and legal. It is legal as companies are registered with the SEC. Security tokens are secure, as the crowdsale is protected by cryptography, SEC and smart contracts. Easy, as nothing gets changed for investors, and issuers have to spend less time on registration.
The experts of the security token platform, Polymath said that:
“The volume of investment in security tokens in 2020 will reach an impressive $ 10 trillion.”
Let’s discuss some of the benefits of Security Token Offering that will allow them to achieve a huge success.
Here are some of the benefits of Security Token Offering:
- Intrinsic Value
Unlike utility tokens, which are built exclusively to access the product or service of the blockchain platform and don’t have other value in their own right, security tokens are digital certificates that provide ownership to:
1. direct or indirect involvement in the management of the company;
2. company property or its share;
3. virtual or physical assets: money, oil, cocoa beans, and so on;
4. credit commitments;
5. share of the profit of the issuer company;
6. dividend payment.
All the above assets are real and valuable things as they can be sold on the market without being associated with the issuer. Security tokens present an opportunity to engage in the process of generating profit.
- Regulatory Compliance
Though ICOs held the cryptocurrency narrative in 2017, regulatory organizations like the United States Securities and Exchange Commission (SEC) issued a majority of these ICOs and termed them as ‘unregulated security’. It resulted in a large number of ICOs to shut down and return the investors’ capital.STOs on the other side, don’t have to deal with such issues as companies list their tokens as securities from the existence period itself. They have to file for exemptions from SEC that protect them from future Desist and Cease orders, to avoid what happened with ICOs. Startups and traditional enterprises both can reap the advantages of a tokenized securities ecosystem by complying with local and international regulations in the early stages. It gives companies benefits over other competitors who reach late to the game.
A Security Token is designed in a way that it can authenticate who can buy and sell it, restricting security token holders from trading it to any address which is not validated. As a result, STOs assure the issuer that their tokens will only be held by accredited investors.
Security Tokens allow fractional ownership of an investment product while lowering minimum investments. It allows more liquidity to come into the market.As a large number of people can buy smaller stakes, many assets that are considered to be illiquid, or don’t have a resale value, can improve their liquidity on the blockchain.Another advantage that STOs have over the traditional financial system is the 24/7 global access that customers have for trading and exchanging. This again brings in more liquidity into the market.
In case, you are looking to understand the benefits of STOs in more detail, you should consult the Security Token Offering experts and get an in-depth understanding of the STO launch process.