Anyone involved with crypto must be familiar with the terms like blockchain, ICO and STO. After the toppling of Initial Coin Offerings, Security Token Offerings were introduced in the market in the year 2018. STO has become the top crowdfunding choice for investors.
STO offers its users with the technical and legal support pattern for the token issuance, including token setup, KYC and AML compliance and deployment services. Let’s know more about it in brief.
ICO + Security + Legal compliance = STOSTO is the acronym for Security Token Offering. It is the latest form of crowdfunding which is being used by startups in the digital space. Why it came into the limelight the moment it was launched? With STO investments, investors get security tokens instead of utility tokens.
Whenever the public invests in a new cryptocurrency or token it is considered a time-sensitive process. STOs are managed per the US Securities & Exchange Commission (SEC).
Some of the primary reasons for what makes an STO so beneficial for businesses are:
- Global capital access
- Low entry barriers
- New ways to market products and services
- Endless possibilities that go beyond the scope of the traditional security
- Better conditions
More or less, both initial coin offerings (ICOs) and security token offerings (STOs) follow a similar pattern of offering a crypto coin or token to the investors which represent their investment. But unlike an ICO coin, a security token comes with an underlying investment asset i.e. stocks, funds, bonds, or real estate investment trusts (REIT).
There are many more differences between ICO and STO. Read on to know about them.
| STO | ICO |
| They are registered under securities and an exchange commission (SEC) i.e. only the best projects will be accepted. | There are no entry rules. A project can raise funds more easily and quickly. |
| STOs are highly regulated. That is why they are more trustworthy for the investors and a bit difficult task for issuers. | ICOs are not regulated by any officials. This makes it riskier for investors to get involved in this project. |
| Security Token Offerings are in trend and their market is flourishing. The market size is expected to surpass up to 10 million USD in 2020. | The lack of regulations and trust has made ICO susceptible to scams and hacks. They have a misuse rate of ~70%. |
| STOs are traded online and are in the area of blockchain. | In such a case, the investors get cryptocurrencies in exchange for other cryptocurrencies by a company. |
With all the key differences between the two, we hope our readers should have got a clear understanding of both of them. Now, let’s move to the pointers on why you should give preference to STO over ICO.
