Security Token Offerings (STO) is the latest innovation in the Blockchain revolution. Often referred to as an offspring of ICO’s, STO’s work as a regulated alternative that provide complete security for token providers and investors alike. The revenue capability of STO’s are already numbered in the trillions as STO’s become a more attractive crowdfunding option. It’s redefining what entrepreneurs and start-ups are able to do, as their capacity for investment grows expediently. STO’s also solve a lot of the problems ICO’s presented, such as the possibility for market manipulation and insider trading. The global reach of the Blockchain means that ideas that might’ve previously been hidden in the shadows have the opportunity to come to the fore. This could have a significant impact on innovation around the globe.
STO’s are ground-breaking in their nature as they offer tangible legal rights as STO tokens are classified as real financial securities. Subject to the Howey test and classified under Federal Laws, STO’s are cryptographic security tokens that take their value from tradable, outside assets such as real estate, capital funds, art etc. They have the ability to generate profit, pay dividends and invest in other tokens.
STO’s essentially originate from a need for transparency and accountability within the Blockchain world and beyond. The discontent associated with traditional financial institutions has been well documented and has arguably increased the need for a decentralized system. One of the most attractive aspects of Blockchain technology is its ability to take the need out for intermediaries like governments and financial institutions.
This move away from traditional business exchanges is changing the relationship between businesses and investors. Traditionally raising capital involved businesses selling a share of their company in exchange for investment support. STO’s allows you to retain total control of your business while still raising revenue. The emergence of STO’s also represents the creation on an online marketplace in which Blockchain technology sustains this ecosystem.
Why 2019 Is The Year For STO’s
While ICO’s have taken somewhat of a backseat in recent months, STO’s are set to dominate the crypto market this year. The regulatory aspects of STO’s not only makes it a safer investment but could mark the start of a more welcoming relationship between governments and Blockchain technology. The challenge with this will lie in protecting the decentralized system security tokens exist within. The greater acceptance security tokens gain within mainstream institutions, the greater the threat to its fundamental premise which is decentralization. While this may cause friction in the ranks of committed crypto devotees, the process is essential to normalize Blockchain technology.
With the prevalence of scams and frauds leading the crypto headlines in 2018, those looking to launch an STO in 2019 will need to appeal to investors who may have been effected or disheartened by fraudulent ICO cases. Investors will be looking more closely into STO’s and will be investing in projects that have detailed and compelling whitepapers and web presence.
While the US is leading the charge in STO platform creation, Switzerland is closing following with the Swiss Stock Exchange building its own platform to issue and trade security tokens. This not only indicates that the Swiss Stock Exchange is anticipating a STO boom but means that the road to Blockchain regulation is closer than we may have expected. Here in Australia there has been some impressive moves that reaffirms growth in the industry. Not only has the University of Sydney signed a landmark agreement with cryptocurrency project Fantom but the Federal Budget has allocated nearly a million dollars towards Blockchain research to investigate where the technology can be implemented in government systems.
The great thing about Blockchain technology is its ability to change and grow. Despite the challenges that accompanied ICO’s in 2018, STO’s have emerged as a viable and growing alternative to mitigate the errors of ICO’s past. With growing recognition of STO’s as a reputable crowdfunding mechanism, there is no doubt that it will have unparalleled potential for growth in 2019.