Blockchain has been responsible for a drastic upheaval in how investing and fundraising is perceived by the general public. Tokens were initially provided as part of Initial Coin Offerings (ICOs) and it gave access to a particular network or services.
In contrast to ICOs, STOs (Security Token Offering) are legitimate financial securities that offer the same functionality of traditional security which enables fractional ownership. STOs are subjected to federal laws and strict regulations -- they are developed to protect the interest of the investor. Security tokens are in the blockchain, and smart contracts enable them to behave in a particular way.
Blockchain smart contracts are programmable to make automated payments for bank loans.
Advantages of security tokens
Security tokens have started to be preferred over the IPO route. Security tokens issued under prescribed regulations have been found to be more cost-effective when compared to the conventional method.
These tokens give investors a channel for portfolio diversification without compromising much on dividend generation. The token may also provide investors with particular voting rights and ownership of shares of a publicly-traded company.
- Low cost As there are no middlemen, there are no administrative expenses. The decreased cost of purchase and sale enables people to generate a prized ROI.
- Quick After the AML and KYC checks have been initiated, the procedure of sale and purchase of security tokens to investors is swift
- International Reach Tokens provide high-security levels as they do not have any location-based restrictions with regards to trade. International acceptance has increased liquidity.
- 24/7 trading The present security system is time-restricted. Security tokens do not have this restriction.
Launching your security token offering (STO)
The issue of securities needs registration with the SEC. This is often a complicated process that costs a lot. There are several regulations such as Reg D, Reg S, Reg A+, and Reg CF that govern STOs, and each has its own proprietary protocol.
- Reg S enables non-USA firms to obtain firms from USA-based investors, provided they comply with jurisdictional statutory requirements
- Reg D establishes annual offer limits and what type of investors to solicit.
- Reg A+ enables fundraising for funds >50 mil US$ from non-accredited investors, and 20 mil US$ from willing investors, regardless of status. Token resale is not restricted unlike Reg D
- Reg CF this aids startups in crowdfunding their investments with a cap of US$ 1.07 mil. There is a compulsory 12-month lock period with regards to secondary trading.
Blockchain App Factory is your go-to source for Whitelabel Security Token Offering solutions. Blockchain App Factory is an STO development company with extensive expertise in the crypto sphere. BAP develops detailed and accurate smart contracts that fortify your token’s value.