Due to the levels of fraud and warnings by the SEC, the likes of Facebook, Google, Twitter and Mailchimp have banned ICO related adverts and investors are being driven to look for other means of investing.
This is where STOs (Security Token Offerings) step in. They are similar to ICOs in that they are an offer made by a vendor to a wider audience – in which the consumer can purchase tokens built on blockchain technology. However, where ICOs are the direct sale of coins or purported utilities, STOs are the sale of securities and by taking part in STOs the underlying is considered to be an investor and not a client user.
Effectively, they pay to receive a security that is represented by a token and to do this, there is a level of bureaucracy namely the company in question must register the offering with the SEC.
STOs sit as a go between from crowdfunding of ICOs and full regulation of the blockchain, and where STOs successfully register with the SEC they can take advantage of exemptions such as the Reg A+ – giving them many similarities to issued shares. Expertsare very confident in STOs, believing that their market cap will exceed $10 trillion by the end of 2020. In contrast ICOs have raised roughly $5 billion.
All of this doesn’t necessarily mean that ICOs are finished, the right projects have just become rarer and it would be safe to assume they will become rarer still as the industry pushes for further regulation and oversight resulting in a pick up in STO popularity.
So what are the negatives to STOs? Firstly, there is the significant administrative burden which carries in part increased legal costs, however this is typically deemed to be offset by providing extra security for investors. It is also noted that currently exchange listing can be problematic, with main line exchanges not fully supportive as yet (E.g. Binance require legal proof that tokens have a utility.)
It is well known that big names in the industry like Coinbase are investing heavily in STOs however they aren’t quite ready for a full rollout as yet albeit we expect that to change as 2019 progresses. STOs are a natural evolution of the sector and the next step toward establishing crypto and blockchain as a viable, secure method of investment asset that will inevitably provide investors with the underlying confidence and security that they need to participate in the space. Some of the finest minds in the world are currently working on STO related tech projects that will undoubtedly play an important part in real world technological evolution and so it only follows that investors will want a reliant and secure method to participate in that potential growth.