Security Tokens! Are They The Future of Finance & Investments?
Any new technology can be considered successful only if it makes the current process better and efficient in every possible sphere. The same can be said about the world of investments and blockchain, as a new technology, has successfully altered the landscape of Investments for good and forever!
What is blockchain?
Blockchain is, at the name implies, a chain of blocks! It is, in essence, a digital distributed ledger that can be used for record-keeping and for affecting financial transactions. The blockchain is not only distributed but is also extremely secure, transparent, and immutable. This means that any transaction recorded on the blockchain is not editable or erasable, making it an interesting prospect for sensitive areas like finance and healthcare.
Blockchain in crowdfunding
Crowdsourced funding has been growing as a trend with every passing day. On one side, there are stocks and IPOs that take care of funding for large corporates. On the other hand, there are platforms like Indiegogo and Kickstarter that help startups get their funds. However, both these platforms are plagued with intermediaries. There is a certain cost associated with intermediaries and sometimes, there is a geographic limit on Investments.
Bringing blockchain into the equation has meant that funding, especially for Crypto projects, has become easier than before. Initial coin offerings (ICOs) are considered to be the first major confluence between blockchain and funding. However, the lack of regulatory frameworks governing the entire process resulted in a lot of scams, marring the image of blockchain and crypto.
Enter Security Token Offering
Security Token Offerings (STOs) came in as a rescue, bridging the gap between being available and versatile, and being regulated. STOs have moved from being a mere concept on paper. There have been instances of successful STOs, especially in the field of luxury real estate. A real estate investment firm AssetBlock has tokenized about $60 million of luxury hotels. There has been an STO announced for residential development in Manchester. The Manchester STO is just the tip of the iceberg for the plan of tokenizing $640 million worth real estate in the United Kingdom.
Launching an STO
The introduction of regulation directly translates into the introduction of complications! The involvement of regulatory bodies like the SEC means that there are some extra efforts on the legal front that need to be taken to ensure that you are STO is completely compliant with the requirements.
It is bound to cost some extra time and money in comparison to the ICO. However, the extra time and money that you spend is bound to pay off better in terms of a better portfolio of investors and better trust that investors have on you – this directly translates into better marketing muscle!
The disruption of the status quo
To this day, initial public offerings or IPOs have been considered the de facto standard for investments and fundraising for the corporate sector. They have been considered quite a cumbersome process muddled with intermediaries and associated costs. Whether or not STOs will replace IPOs as the preferred channels of funding remains a question to be answered.
The element of uncertainty can be associated with the fact that a lot of jurisdictions share a love-hate relationship with blockchain and cryptocurrency. There have been a few countries like Malda, the United States, Gibraltar, and quite some countries in the European Union that have been welcoming towards distributed digital ledger technology. however, it does not, in any way, guarantee that every other country will adopt the technology any time in the near future.
The growing need for establishing compliance, the concept of the Global Village, and the fact that Investments cannot any longer be confined to specific geography stand in favor of STOs becoming the order of investments in the future. There are a lot of regulations that need to be in place before you launch your STO, leave alone marketing it. These processes are not likely to become easy but they are bound to become more common, so people start adopting STOs with a greater degree of acceptance.
In all of this, it should not be forgotten that ICOs still rule the roost when it comes to crypto investments. The ease of creating an ICO, the lack of time and money consuming regulatory compliance, and the vagueness of the promise make it a preferred choice for a lot of crypto startups. The SEC determines whether or not a token is a security is based on how the token actually behaves in the real world and not on how the token was intended, and this has led to a lot of utility tokens being classified as security tokens. This has led a few ICOs to get classified STOs, and this is against the intention of the launchers who wanted to stay out of the regulations of the SEC.
It cannot be denied that all the factors listed above. Towards STOs becoming the order of investment in the future, not just confined to a few jurisdictions but rather globally! The promise of transparency, immutability, swift transactions, top-notch security, and above everything, and compromising legal compliance turn the tables in favor of STOs.
A lot of entrepreneurs believe that the best time to invest in the technology of the future was yesterday, and the second-best time is right now! If you are one of the Aspiring entrepreneurs who would like to ride on this newfound wave of popularity and relevance, all you need to do is get in touch with a blockchain development company that specializes in creating, marketing, and launching STOs.
Creating and launching an STO requires quite a lot of expertise, not just in the field of blockchain technology and development and crypto-economics. The company needs to know quite a lot with respect to the market, the legal frameworks, the regulatory requirements that might differ from country to country, and even on a state-to-state basis.
Therefore, it is mandatory that you do meticulous research and exercises extreme diligence in choosing the right development partner for launching your STO. after all, a great business idea does not count on just one layer but on making a profit built on that layer – just like how STOs and creation of STO are built on technology like blockchain.