What Is the Role of a Smart Contract in a Security Token Offering?

In an STO, a smart contract is a self-executing contract with the terms of the agreement directly written into code on a blockchain. It automates crucial functions of the security token, such as enforcing regulatory compliance like trading restrictions and investor eligibility.

Smart contracts also manage the distribution of dividends, voting rights, and the automatic transfer of ownership. This automation reduces the need for intermediaries, lowers administrative costs, and ensures that the rules of the security are followed immutably.