Security Token Offerings
STO - Security Token Offering, it is completely a crypto crowdfunding model which replaced the need for ICO. Launching an STO is not so simple as Like ICO. In Initial coin offering concept, you will create tokens, publish your white paper, deploy your website, Market your token and will collect funds for the tokens you sold. Whereas in STO, you'll do the same, but here you should create security tokens instead of utility tokens. You must give security to the investors you get to connect with.
Most importantly you should do all these things by underlying the SEC rules and native government rules. Because this innovative crowdfunding model involves with security tokens that are packed with existing real-world assets. So we'll discuss every detail of launching an STO in brief below.
WHAT ARE SECURITY TOKENS?
After smart contracts, ethereum, and utility tokens the crown of cryptocurrency now powered with one more star called – security tokens. Security tokens are considered to be the best remedy for wounds caused for ICO. What is actually a security token?
Tokens got split up and categorized into two.
A token that pays share profits, pay dividends and let the investor invest in other tokens are considered to be the security token. This kind of tokens will act as digital shares which are backed with tangible like assets, profits, and revenue of the firm.
What are security token offerings ?
As we said above it is just similar to ICO , But this is kind of crowd-funding model provides high level protection for investors rights and reduce risks of issuers in regulating the token distribution. This is achieved by selling the Security Tokens.
Though the Two crowd funding models are look alike, but there are some significant differences.
STO Vs ICO - The Difference
1. In STO The issuer must comply with higher costs, Because the this is a type of crowd funding model which involves the placement of securities. Where as ICO, Is just a crowd funding model, which doesn’t require any security involvements.
2. In STO Only professional investors can participate. Because the nature of STO is considering the investors as business partners.
3. STO Sells Security Tokens, Where as ICO Sells Utility Tokens
4. nvestors of STO have rights to claim share of profits, But where as in ICO, Investors can claim only the product or services after the launch.
5. ICO’s are not regulated But STO’s are regulated.
How STO Have gained more value than ICO?
This is just achieved by the nature and the token entity which it sods during the crowdfunding. As we already discussed, STO Tokens have more security than ICO Tokens(I.e) The investors don’t have to provide any security, but the issuer have to provide security interms of profit,physical asset or with business shares.
If any thing happens negatively for the investor during the crowdsale, Then he can claim it legally. But In the case of ICO we could not claim anything if any scam occurred. Thus the STO favors solely to the investors side, It gained more value than ICO among investors.
How to launch STO?
As far as now, we have discuss STO from an end user (investors) point of view, which have covered the introduction of ICO, utility tokens, Security tokens, What are security tokens offerings, Difference between STO and ICO, and how STO have become top of the market. Right?
The remaining section of this article is gonna discuss Security token offerings from an business (issuer) point of views. The first thing is how to launch STO
Steps to launch STO
1.Deriving the Strategies and Plan For STO
2.Focusing on what to do and what not to do
3.Compromising the regulatory issues
4.Deciding whom can participate and whom can’t participate
5.Backing up the costs for security placements
7.Fixing the issues faced by investors immediately
1. STO Business Plan
It is not a simple task as you do like in ICO, Launching an STO will involved gradual implementation of sequential processes. First and foremost, the issuer must know what he/she are going to do, How is going to approach the entire process. The issuer must define a right strategy before launching the STO.
1. Write up what you are going to do with your STO, and make it as a document, finally wrap it up as a white paper.
2. Before releasing the white paper, you must have complete some mandatory things. Which involves understanding the security laws which cover up obligations on chosen jurisdiction.
3. At the moment of releasing the white paper you must have a pack up of Tokens. So you must connect with a blockchain company like bitdeal, who are expert in developing security token.
4. You should do some marketing activities to promote your security tokens. But remember you should do marketing activity with subject to the laws involved. So you cant market your tokens on internet as you do in ICO.
5. In STO, Smart contracts are main elements, So your STO platform must have the ability to automatically generate, proper smart contracts for everyone who involves in crowd selling.
6. Make sure your smart contracts are properly encrypted, and has no code bugs.
2.Do’s and Dont’s In STO
i.Market your tokens, but your marketing plan should comply the security laws
ii. Define right and affordable securities, so that you can prevent not fulfilling the investors claims.
iii. Must understand the security laws
iv. Define a strategy for your token sale
v. Make your STO activities transparent to the investors
i. Never scam the investors
ii.Never cross the security lines which is defined for the particular niche you choosed
iii.Never do raw marketing for your Tokens on Social channels
3.Compromising the Security laws
Security laws may vary depending upon the asset type which backed up by tokens. So here you need to meet such restrictions, limitations, legal agreements, KYC/AML, tax regulations, marketing plans.
Also your STO launch must account the security laws and regulations of the country where the investors located.
4.Deciding whom to participate and whom not to participate
We can classify the crowd funding or offerings in to two types
1.Public offerings 2. Private offerings
ICO’s are public offering , So anyone who are willing can participate, but remember STO’s are not public offerings, these are the private placement of assets. So STO’s are subjected to the accredited investors alone.
5.Prepare your financial back up
As the STO involves a lot of procedure in meeting the regulations, KYC/AML Procedure, and the placement of securities, The issuer must have a higher cost of pack up. So prepare your finance needs before you launch STO.
This is the sole of your STO, You must have to create tokens, which should cover the security, or the asset you are going to sell. This entire token development must be obey the traditional SEC Laws which define the nature of Security Tokens. To get proper consultation and development of your security tokens contact bitdeal now.
There are several things involved here
1.The issuer of security tokens have to take the whole responsibility to reach the audience(investor). And must proceed right promotion plan.
2.In-case of any emergency the issuer must have a right support from expert lawyer
3.The issuer must understand
7.Be responsible for any inconvenience happens on investors side after the launch of STO
Finally Launch Your STO
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