STO - A Modern Rendition on the traditional fundraising

  • As the industry evolved, businesses started looking for different ways to brush up their fundraising methods. The early investing stage before ICOs made progress was very traditional, driven by venture capital. But in 2018, when businesses were shifting towards a decentralized environment, this method started looking out-of-date. Also, it was unadaptable for accommodating new concepts such as on-chain governance. So, we eventually started looking for something better.

    The main idea was not to create something new but to modernize the existing structure. Even though the ICO market was booming widely in 2017, the ICO market faced some hurdles later as it became one of the easiest fundraising methods to be prone to scams. This is because ICOs are barely regulated, there is no way you can stop somebody from making you believe and invest in a great idea, to later abscond with the money. Most ICOs have categorized as securities anyway, why don’t we start issuing ample of them? Security Token Offering emerged from one such idea. Overtime, STO’s were preferred more than ICOs as they are backed by real-value assets and abide by proper security regulations.

    Recently, the Japanese government officially launched its security market. According to the reports, the amendments were dated to be effective from May 1, 2020. The amendments introduced a range of new measures from baking regulations, requirements for cold wallets, to new legal terminology.

    Following that, very recently, i.e., this past week, Taiwan also published its new STO regulations. The regulations bring more stability to the country’s STO market. With the new strategies being introduced, the crypto community acknowledged a huge upgrade. For instance, the new legislation deregulated their STOs up to a value of NT$30 million. This means companies can now access more capital without having to invest a huge amount of money in an IPO.

    There is already a list of countries operating with legitimate STO regulations such as the European Union, United States, Australia, Hong Kong, United Kingdom, France, Switzerland, Lithuania, Brazil, Mexico, Canada, Israel, Germany, Singapore, etc. And more countries, coming forward, open up wider opportunities for investors in the blockchain/cryptosphere to make use of a more secure, lucrative fundraising platform.

    Limited Participation, More Security!

    All of that being said, a significant attribute of STOs is that the regulations place restrictions on who has the ability to enter the STO market. Only accredited investors will have the advantage of making use of such next-gen financial tools. STOs are not accessible for someone who is not a professional, verified investor. This reduces risk chances and provides more security when compared to other fundraising mechanisms such as an ICO.

    What does this all mean?

    From what we read above, it is evident that regulators, authorities, and potential investors in the cryptosphere all around the world are more accepting of STOs than ICOs. From a legal perspective, regulators find it more efficient to enclose tokenized securities under existing security laws. And, it is clear that STOs represent a revolutionary market for businesses. To sum up, with an understanding of the true depths of regulatory jurisdictions in different locations, investing in an STO is definitely a good idea!