It’s been a very long time since the concept of ICO was launched. A company named Mastercoin launched the first Initial Coin Offering back in 2013, and after that, Ethereum jumped into the game to raise capital by utilizing ICOs.
However, as a better alternative for these ICOs, the Security Token Offering concept was brought to light just a few years ago. It was 2019 when the companies, especially those listed on Nasdaq, started to adopt this new concept to trade tokens for raising capital.
Security Token Offering doesn’t have a long history, but its adoption was fast if we compare it to older ICOs. It all started in 2018 when the STOs concept was publicly introduced. At first, it was pretty vague for companies and investors until it started making more sense.
At the very first stage, the infrastructure for STO space was not yet ready, and STO issuers also had limited investor reach. The starting costs for STOs were also high for the companies, and not many organizations were taking it seriously. GBX was one of the early adopters to introduce STOs to the market.
The GBX actually started to offer digital debt securities and funds, which was their first step into this newly introduced space. STO still needed time to mature and fewer people were aware of it.
In this young market, many big players started to investigate STOs. Many companies also compared it with ICOs to see which one is the most reliable option for the investors and stakeholders. The Crypto market was also becoming dominant at this time and that’s why the awareness for STOs also increased with each passing day.
This phase started in 2020 when Crypto platforms started to list these tokens for the general public, and many companies also decided to push their Security Tokens into the market. More people learned about the Blockchain to understand the solid foundation that lies under the hood.
In this thriving year, many companies started offering their tokens including SpiceVC, Nexo, and Blockchain Capital. The costs for launching STOs also slowly came down due to its market trend. The STOs infrastructure was matured enough for big companies to participate and offer their own valuable tokens. However, the glory phase for STOs was still yet to come.
Current STOs State 2021
There is no doubt that STO is still maturing, and its adoption is increasing every month. Many new platforms for investors and ventures were introduced including STOKR, PolyMath, and Securitize. The platform became a gateway for these investors and ventures who are willing to raise capital.
Also, many countries such as America, Colombia, and Brazil also started to accept Crypto, and these companies came up with jurisdictions that were reliable for new ventures who want to introduce their own Security Tokens into the market.
If we see it on a wider spectrum, then Hong Kong is benefitting the most in 2021 from this Crypto and STO space. It is currently an attractive place for Blockchain firms due to the licenses offered by the government that facilitate the fintech industry. Also, the regulations for Crypto are excellent for retail investors as well as Crypto Platforms. Recently, a fully regulated and licensed digital assets platform OSL was launched in Hong Kong.
STOs Adoption Reasons
There are various reasons why ventures and investors are more inclined towards Security Token Offerings than other models. The downside for ICOs was that many companies also scammed the investors by taking away all the capital. Moreover, securities were being sold in the name of tokens that violated the U.S securities law.
Hence, a better Tokenization system was much needed where transparency was the topmost factor. STO was introduced with the same goal to make investments much transparent and easier.
Additionally, these STOs use the Blockchain model for end-to-end transactions, so there is less chance of fraud. ICOs were characterized by a lack of transparency. With the help of the Blockchain Ledger, STOs have fixed all of its major issues and flaws, which makes any possibility of fraud almost nonexistent. The SEC is also inclined to enforce strict laws on non-compliant ICOs and this is another reason that makes Security Token Offerings more attractive.
STOs are making their way up in 2021, and with more and more countries becoming Crypto-friendly, we are more likely to see new ventures listing their own Security Tokens. The market is still considered young, and it will take a few more years for companies to realize the potential of these Tokens.
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