Connect with us

STO Launch Strategies

Should You Consider an STO?

mm

Updated

 on

Should You Consider an STO?

From a legal perspective it can be argued that any ICO is in fact an STO. The Howey Test defines a “security” as having the following attributes:

Any contract, transaction, or scheme whereby (a) a person invests money or anything else of value, (b) in a common enterprise, (c) and is led to expect profits, (d) predominantly from the efforts of others.

While Singapore is showing signs of not following the same definition of a security, the majority of the world is following the United States definition and interpretation of a security.

If you are considering any of the following you might want to consider an STO.

  • Tokenization of real estate or other real world assets.
  • Tokenization of traditional securities and companies. This behaves like shares of a corporation and are also be known as “Equity Token Offerings” or “ETOs”.
  • Tokenization of venture funds or incubator programs;
  • Tokenization of precious metals, oil, or other commodities.;
  • Profit-sharing right in a business entity, etc.

Advantages of an STO:

There are numerous advantages to performing an STO. These are some of them:

  • 24/7 liquidity.
  • Simpler and more cost-effective than an IPO.
  • Compliant for crowd-funding via certain SEC Exemption.
  • Fractionalization of real estate, or other assets.
  • Offers investors more transparency than an ICO.
  • Less legal uncertainty than an ICO.
  • Simpler management of investors with KYC/AML being baked into security tokens.

Disadvantages of an STO:

  • Careful tax structuring is required.
  • Legal compliance requires investment in reputable law firms.
  • Limitations on resale such as 12 month lock-up period.
  • Number of investors might be capped at 99 or some other arbitrary number depending on legal structure.
  • Corporate structure may be complicated, and requires legal advice.

Summary:

Executing an STO requires more legal and corporate work than an ICO, but the rewards are reduced legal uncertainty, and the ability to raise funds in a legally compliant manner. By following a strategy that is advised upon by proper legal council, your STO will be able to raise funds without jeopardizing the future of the founders or the corporate entity itself.

Spread the love

Antoine Tardif is the founding partner of Securities.io, the CEO of BlockVentures.com, and has invested in over 50 blockchain & AI projects. He is the founder of Unite.AI a news website for AI and Robotics. He is also a member of the Forbes Technology Council.

Company:Website:Location:
Block Venturesblockventures.com2179 West Bay Rd, Grand Cayman, Cayman Islands
Moonwhale Venturesmoonwhale.ioChoa Chu Kang Ave 2, Block 254, Singapore
Company:Website:Location:
BX3 Capitalwww.bx3.io261 Madison Avenue New York, NY 10016
Priority token LLP
www.ptoken.ioSuite 6, 5 Percy Street, London, Fitzrovia, W1T 1DG, United Kingdom
Company:Website:Location:
BX3 Capitalwww.bx3.io261 Madison Avenue New York, NY 10016

Advertiser Disclosure: Securities.io is committed to rigorous editorial standards to provide our readers with accurate reviews and ratings. We may receive compensation when you click on links to products we reviewed.

ESMA: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Investment advice disclaimer: The information contained on this website is provided for educational purposes, and does not constitute investment advice.

Trading Risk Disclaimer: There is a very high degree of risk involved in trading securities. Trading in any type of financial product including forex, CFDs, stocks, and cryptocurrencies.

This risk is higher with Cryptocurrencies due to markets being decentralized and non-regulated. You should be aware that you may lose a significant portion of your portfolio.

Securities.io is not a registered broker, analyst, or investment advisor.