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What is a Security Token
In a traditional way an investor, private equity fund or VC fund invest in the assets of the company in the form of shares or debentures. When a company, using blockchain technology, choose to tokenize their shares or debt, and get it funded by these investors partially or fully, that’s digital security called “security token” or “equity token”. The company can decide the terms and conditions of such “security token” with respect to dividends or even voting rights but such token certainly is tradeable assets and gives the ownership rights to investors.
What is Utility Token
Utility token is quite different from the security token. For understanding purposes, we can call it a pre-order coupon, by which you as a customer can avail the product and services of the company in the future. Considering it is not an investment asset, hence it is exempted from any legislation. It can’t be freely tradeable and does not provide any capital returns.
| Security Token | Utility Token |
|---|---|
| Investment Asset | Business Coupon |
| Regulated Securities | Exempted from securities law |
| Gives ownership in the company | Gives right to avail product and services in the company |
Illustrations of Security & Utility Token
Basic Attention Token (BAT) is one of the examples of a utility token. Advertisers purchase advertisement using BAT utility tokens, which are distributed among users and publishers as compensation in an agreed ratio.
Mobu is an example of offering the security tokens. It gives a platform to companies to launch their ICOs.
Challenges faced by the companies, in raising the fund by issuing security token
1- Regulatory Uncertainties:
Because the crypto world is still a newer industry, one of the most challenging questions is how regulators are going to class them. The regulations are confusing and cumborsome. There is almost no clarity on the treatment or taxation of the asset. It looks like we are still away from a regulatory structure in this space. Due to lack of this structuring, many ICOs are avoiding classifying their token under the head securities. Secondly, these securities can not be traded freely and have to be under some restrictions.
2-Accounting hurdles:
To give a true & fair view of a company, any auditor would require the details of all the token transactions in detail. If these systems are not in place, then theoretically it is possible that one person can create multiple wallets, and transact artificially to show the revenues in the books of the company. Not to mention its quite difficult to stay compliant fully in case of raising of funds, because it does have US GAAP reporting functions.
3.Initial Finances
It can be extremely difficult to get credit for some initial expenses because lenders don’t trust the startups. To stretch the finances to cover the initial development cost, regulatory expenses, licensing cost, marketing & administrative expenses, usually is not easy.
What is MOBU and how MOBU will facilitate the release of security tokens on the blockchain
The traditional fundraising happens through an IPO which is quite a complex time-taking process with a long list of regulatory & legal compliances. IPOs are cost-heavy and with an involvement of lots of middlemen (banking institutions), this whole process is not instant.
The security markets in the blockchain space are still untapped. This new market with a concept of ICO, looks like has a huge potential but it is still novel and requires a lot of detailed facilitation between industry and government to make it happen.
MOBU is providing a decentralized ICO platform to the companies who wish to raise the capital by issuing security tokens in the blockchain world. It will take care of operational, technical and blockchain related legal regulations, hence these issues will be fully compliant with. This platform offers safe and well-organized services to the companies for launching their ICOs. MOBU will further create a secure environment for investors also.
There are different regulary processes for launching the ICO in different geographies. MOBU has created a platform which has consolidated all this requirements and information in one place. So, MOBU is like a one-stop shop for any company who is launching an ICO through them. Further, with this initiative, MOBU is opening the wider window for the non-technical corporate to launch security tokens effortlessly.
MOBU Solutions to protect the investors
There are various measures MOBU is taking to protect the investor’s right and create an investor-friendly environment:
1- There will be certain sales which will be limited to accredited investors only.
2- To ensure that the issuer adheres to the pre and post ICO issue goals, MOBU will keep the investor fund safe in an escrow account with an option of withdrawal if in case there is a breach by the issuer.
3- Bank support and guarantee to investors that the bank will not block the transaction when fiat money is converted into cryptocurrency.
4- By providing an exclusive trading platform to approved investors, it will safeguard the investors from any financial frauds.
5- It ensures continuous liquidity and exchangeability for investors.
6- It allows voting rights and dividends in tokenized form for ICO's.
More information
Website
Whitepaper
Medium
Twitter
LinkedIn
Mobu Team
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