Security Token Offerings or STOs as they are commonly abbreviated, are observed to revolutionize investments and finance. STOs, with their tokenization-aspect, coupled with the mandatory compliance with regulatory authorities, are spearheading the convergence of traditional finance and the new technology of crypto tokens.
STOs are, as the name suggests, tokens that represent an asset in a fragment. Unlike cryptocurrencies or crypto coins that have an inherent value, STOs derive their value from an underlying asset which is being tokenized.
Security Token Offerings have all the credentials to qualify themselves as securities, (Including the passing of the Howey Test) and these credentials come at a cost of being under the scrutiny of regulatory bodies like the Securities and Exchanges Commission (SEC). It is this requirement for compliance that makes STOs considerably immune to frauds.
The precursor of the STO, Initial Coin Offerings, had changed the way crypto projects raised funds. However, with the increasing instances of scams, ICOs lost their luster of lucrativeness.
With Security Token Offerings, however, the compliance plays an important role in keeping away malicious projects and investors. The convenience offered by ICOs in the first place, however, are not compromised - the global scope of seeking investments, the reduced transaction times, and the economization of the process by reducing the costs involved with middleman and intermediaries.
This makes STOs a welcome evolution for fundraising and investing alike. It is expected that the financial world, much like the SEC, will endure, if not accommodate the Security Token Offerings and their advantages.
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