Security token offerings – or STOs – provide a different way for companies to raise additional capital. It is a regulated version of token sales, offering peace of mind to investors. Despite the current outlook, the industry has its own set of challenges to address.
What exactly is an STO?
A security token offering or STO is a public offering where tokenized digital securities are sold to investors. These tokens are eventually traded on either cryptocurrency exchanges or security token exchanges.
Security tokens can be used to trade real-world financial assets – including equities and fixed income – by leveraging blockchain technology to store and validate ownership of tokens.
As the term “security” is in the name, this form of raising capital is subject to regulation. For investors, this introduces an extra layer of safety and security. Currently, STOs are slowly starting to gain traction among smaller and mid-sized companies looking to secure additional financing.