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The new digital economy is dynamic and technologies like blockchain and cryptocurrencies are ways that companies of any size and segment can use themselves to adapt to new digital consumers and survive in the new market.
One of the forms of capitalization and proximity to customers found by startups and digital companies are the ICOs, however, a new concept has emerged and promises to bring more security to investors: the Security Token Offerings (STOs).
Continue reading and learn more about STOs.
What are STOs and how do they differ from ICOs
Originated and popularized in 2018, Security Token Offerings or STOs are an alternative token to ICOs.
STOs are issued by companies and represent a shareholding of buyers being linked to investment assets, that is, they are backed by assets that have monetary value outside the digital world, such as company profits or revenue.
In this way, they work like securities (IPOs), however, with the advantages and flexibility of technological assets, such as cryptography and the security of blockchain technology.
Although STOs and ICOs deliver assets to investors in a similar way, STOs are regulated much stricter than ICOs. In addition, ICOs offer tokens that guarantee access to decentralized platforms or applications, whereas STOs are assets that offer security, that is, bonds that pay dividends, interest-generated fees or part of the company’s profit to its investors.
STOs provide their investors with more transparency protection compared to ICOs, however, because they have the characteristic of Securities, they are subject to the determinations of legal bodies such as the United States Securities and Exchange Commission (SEC) and the Supervisory Authority of the Swiss Financial Market (FINMA). Therefore, STO participants and investors are usually limited to institutional investors.
Benefits of STOs
One of the great benefits of STOs is the issue of liquidity, since, by having technology, dividends can be paid to investors through smart contracts, making the process more agile and automatic and reducing or eliminating the involvement of intermediaries in transactions.
Another advantage is the reduction in costs and bureaucracy that STOs present, since they do not require the opening of IPOs, however, they continue to offer their investors the same legal support that they have. In addition, Security Token Offerings are not subject to the same exchange rate fluctuations as cryptocurrencies, as their price is not directly linked to currency speculation.
Among the benefits presented by STOs, the possibility of people from anywhere in the world being able to acquire them through the Internet without restrictions of hours is also highlighted.
STOs are the safest and most technological ways companies can take to capitalize on their business in compliance and ensuring greater transparency and legal support for their investors. In addition to providing advantages for companies such as reduced bureaucracy and costs of offering securities to investors, they also have the security that cryptography and blockchain technologies offer in the fight against fraud.
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