What are Security Token Offerings (STOs)?
Security Token Offerings (STOs) are a regulated fundraising method in which companies issue digital tokens representing ownership or another form of stake in an asset, typically secured by real-world financial assets such as equity, real estate, or other investments. Unlike Initial Coin Offerings (ICOs), which often provide utility tokens without underlying assets, STOs comply with securities laws, ensuring that investors have legal protection.
The process involves issuing tokens that can be traded on secondary markets, providing liquidity to investors. By leveraging blockchain technology, STOs ensure transparency, reduce fraud risk, and enhance accessibility for a wider range of investors. This method not only invites interest from institutional investors but also opens the door for retail investors to participate in traditionally illiquid markets.
Overall, STOs represent a significant advancement in tokenomics, merging traditional finance with modern blockchain technology, thus reshaping how capital is raised and investments are made.