14 Feb 2019 Josphat Kariuki
STOs are Becoming the New Standard for Fundraising
The ICO market exploded in 2017, but the bullish trend quickly evaporated in 2018 in a global bearish market.
The negative wave for ICOs was also enhanced by numerous cases of security breaches and ICO frauds. Governments are taking extreme measures to protect their users from eventual scams – by banning all cryptocurrency-based trading, such as exchanges and token sells platforms. Some of the most influential people in the economic sector like the former Prime Minister of Israel Ehud Barak even classified Bitcoin as a “Ponzi scheme”.
While all cryptocurrencies suffered a hit in 2018, Security Token offerings (STOs) managed to stay afloat. According to crypto-experts, STOs can answer the demand for accountable and compliance-ready fundraising market.
STOs are tokenized assets, ready for trading, and are entirely a subject to regulatory agreements. STOs, give investors permissions while being a superb way to raise money by startup companies.
Security Token Offerings are giving massive benefits over ICOs – STO issuers are selling securities, which means they are bound to their holders. Other benefits for the investors include that the tokens are asset-backed, dividend distribution or a vote in decision-making meetings for a given business. STOs also have to meet local regulatory standards to be eligible for release.
Trevor Koverko, Polymath’s CEO described Security Token Offerings as the “best-kept secret” in the crypto market at the moment. Big players like Ethereum and Polymath are bringing in trillions of dollars in securities and distributing them into the digital world of cryptocurrencies. Ethereum is working on developing a single ERC-1400 token standard, which will aid STOs in particular. The token standard is now in a testing phase.
STOs are gaining momentum, according to the Inwara’s annual crypto trend report. STOs gained in popularity in Q4 2018 amid global cryptocurrencies bearish market.
The problems STOs are facing are slow acceptance by government regulatory organs, the lack of anonymity, and a large budget to start an STO. Nevertheless, STOs provide a platform for blockchain and fintech-related projects to raise fund in a clear, legal way, without concerns for scams.STO Security Token Offering ICO regulation Securities