How Does a Security Token Offering (STO) Differ from an ICO?
An STO is a fundraising method that offers security tokens, which are legally compliant investment contracts representing ownership in an underlying asset. Unlike ICOs, STOs must adhere strictly to securities laws, involving registered broker-dealers and KYC/AML procedures.
This compliance provides greater investor protection but also increases legal costs and limits investor accessibility.
Glossar
Investment Contracts
Due Diligence ⎊ Scrutinizing the underlying terms of any investment contract, particularly those involving crypto derivatives or tokenized assets, is non-negotiable for risk mitigation.
Tokenization
Abstraction ⎊ Tokenization, within cryptocurrency, options trading, and financial derivatives, represents the process of converting rights to an asset into a digital token on a blockchain or distributed ledger.
Fundraising Method
Selection ⎊ Fundraising Method refers to the specific legal and technical structure chosen by a project to solicit capital, such as a public sale, private placement, or grant-based treasury funding.
Security Token Offering
Issuance ⎊ A Security Token Offering represents a capital formation mechanism leveraging distributed ledger technology to issue digital securities, fundamentally altering traditional private placement structures.
Investor Protection
Disclosure ⎊ Mandates for transparent and comprehensive information regarding asset risks, operational mechanics, and governance structures are fundamental to safeguarding participants in crypto and derivatives markets.
Tokenized Real Estate
Asset ⎊ Tokenized Real Estate represents the fractionalization of physical real estate properties ⎊ commercial, residential, or industrial ⎊ into digital tokens on a blockchain.