Glossary > Security token offering (STO)
The Security Token Offering (STO) is a digital token backed by blockchain technology that represents a stake in STO assets, enabling digital fundraising while still complying with government regulations. Security tokens require extensive regulations. STOs are digital representations of real-world assets such as bonds, stocks, or gold. As a result, security token offering services enable asset tokens for many businesses.
Security tokens are similar to certificates issued for stocks. In the case of stocks, ownership information is entered into the document as an official certificate of ownership. For STO, the information will be recorded for security tokens, but the main difference is that the STO is saved in the blockchain and represented by a token.
Therefore, there is no regular token exchange. However, it is similar to an ICO (Initial Coin Offering) as it is a fungible token with monetary value.
An STO is similar to ICOs. But unlike the latter, investors’ protection is ensured. Indeed, STOs must meet regulatory requirements. In the past, some unregulated ICOs were fraudulent and brought issues to the market. Regulations were implemented to tackle this. In summary, a security token offering (or STO) is a regulated way to raise funds through blockchains.
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