The blockchain is one of the promising technologies that support crypto assets like Ether, Bitcoin, utility tokens and security tokens. The crypto assets present an enormous opportunity to bring transformation to the financial services marketplace. Though people are familiar with utility tokens, the security token is relatively a new concept. Before we discuss the process to launch Security Token Offering (STO), we shall first explain what is STO and a security token.

When a token is subjected to federal security regulations and can derive its value from an external, tradable asset, it is categorized as a security token.

While utility tokens can only be used to get access to specific services, security tokens represent assets with rights of ownership. The security holders are entitled to profit share, equity, dividends, voting and buy back rights.

Due to the increasing demand for regulatory frameworks associated with the token issuance, startups launching ICOs should follow legal regulations which can give more credibility and security to the investors.

It is true that the process can seem complicated, but there are a lot of benefits with a security token issuance. Tokenizing securities improves the liquidity of underlying assets which can engage more investors.

Security tokens also come up with other benefits like increased market efficiency, lower issuance fees and fractionalization of larger assets. If a startup meets the required regulatory obligations, the security token offering can create a vast potential for the variety of applications.


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