Security tokens: 4 benefits to the STO model

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CryptoMode Bitcoin Investing Financial Advisor Security Tokens

Security tokens are a new form of a blockchain-based asset with many benefits and advantages over traditional securities. 

One benefit is that security tokens have the potential to bridge the gap between traditional securities and cryptocurrencies. That could help make cryptocurrency more accessible to investors who don’t want to deal with trading digital assets on exchanges.

1. Bridging the gap between security and cryptocurrency

Security tokens are a new digital asset that combines cryptocurrency’s best features and traditional securities.

They are backed by tangible assets and can be traded on exchanges, making them an efficient way to raise funds for companies.

Security tokens follow the same principles as traditional securities but have a few key differences. They are more secure, liquid, and accessible to investors worldwide.

2. Security Tokens Have Increased liquidity

Security tokens, as they are issued on the blockchain and are fully compliant with SEC regulations, can be traded on exchanges. In addition, holders can also trade security tokens on a secondary market, similar to trading stocks in the over-the-counter (OTC) market. 

The increased liquidity that comes with security tokenization provides investors with an increased opportunity to profit from their investment and provides liquidity for investors who wish to sell their holdings.

3. A solution to regulatory concerns

Regulators have expressed concerns about using cryptocurrencies in funding projects, citing money laundering and fraud risks. 

However, there is a solution: Security Token Offerings (STOs). 

While ICOs are often opaque and difficult to track from the investor’s perspective, STOs provide increased transparency. That makes it easier for regulators to monitor funds raised in an STO than through an ICO. 

Additionally, because STOs are backed by tangible assets like stocks or bonds—which are regulated by law—they can be used as a more regulated alternative for businesses looking to raise capital.

4. Accessibility for all parties

The final benefit of the STO model is that it makes tokens accessible to all parties. 

Only limited participants can be involved in a token sale in the ICO space after meeting strict requirements. With an STO model, however, this is not true. Instead, any investor can participate if they meet their applicable eligibility requirements and are willing to pay an appropriate price for their investment.

The increased liquidity that comes with this accessibility means that investors can trade their tokens easily without waiting for a secondary market to develop. Nor do they need to work through an intermediary such as a broker-dealer or other licensed entity. Additionally, issuers have more potential buyers when they go public with their offerings. Therefore, better pricing on the initial sale of securities (with its accompanying fees).

Security tokens offer a considerable potential for growth that may help bridge the gap between traditional securities and cryptocurrency in the future

Security Tokens have several advantages over ICOs, including:

Liquidity: Security tokens are far more liquid than ICOs. That is because they’re backed by physical assets, which can be sold immediately if needed.

Regulatory compliance: Security tokens fully comply with government regulations and provide additional investor protections, such as solid KYC/AML policies.

A wide range of buyers: Security token offerings (STOs) can be purchased by anyone who meets the minimum financial requirements. That includes accredited investors to retail investors. Plus, they don’t require specialized knowledge of cryptocurrencies or blockchain technology as ICOs do.

Conclusion

We believe that security tokens are the future of cryptocurrency and blockchain technology. 

They offer a massive potential for growth that may help bridge the gap between traditional securities and crypto in the future. 

In this article, we’ve outlined four benefits of using STOs for your ICO or other blockchain-based projects:

  • Increased liquidity.
  • Regulatory compliance.
  • Accessibility for all parties involved (from investors to issuers).
  • Their ability to make investing safer through tokenization.

The future of security tokens looks rather exciting. 


None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.