Security tokens allow traditional investors to enter the cryptomarket while adhering to current government standards. These tokens are preprogrammed with integrated regulatory requirements. As a result of this integration, security tokens are the perfect fit for the tokenization of certain assets.
Gaining a better understanding of each type of token, and how it functions, helps you to be a better-informed investor. As different assets require different legal requirements, its only natural that different types of security tokens emerged. Today there are four main types of security tokens in use in the market.
Equity security tokens represent ownership rights to a particular asset. These tokens can represent ownership in a physical asset such as a percentage of profits from real estate investments. Additionally, these tokens fit perfectly with digital assets as well. Consequently, this is the most common type of security token in the market at this time.
Bond security tokens provide owners with a fixed income, over a predetermined time period. The best example of this type of token is a fixed loan. The issuer of the loan is entitled to receive their interest and principal payments until the completion of the loan. Bond security tokens make it possible to crowdfund loans.
Real Estate Asset
Real estate tokens come in two varieties. The first type of real estate token encountered in the market represents ownership of a property. Tokenizing real estate provides more liquidity to investors. It also allows for the crowdfunding of investment properties via the blockchain. Harbor is one firm that specializes in these tasks.
The second type of real estate-based security token is a debt-type asset. In this scenario, the rent paid for a particular investment property undergoes tokenization. In this manner, smart contracts can automate the collection and distribution of the rent among the investment parties.
Commodity-based security tokens represent investments in bulk commodities such as gold, silver, wheat, or oil. Tokenizing these items allows more investors to participate in the market. As a result, token holders can rent out their ownership rights to third-parties once they have been tokenized.
SEC Steps into the Market
Recently, the SEC has taken a more hands-on approach to the growing security token marketplace. This increased involvement in the market has created a scenario where companies are now seeking to work for hand and hand with the SEC on their crypto projects.
One example of this scenario occurred this week when the security token platform TokenSoft Inc. invested in a major SEC-compliant broker-dealer. Tokensoft isn’t alone in their proactive approach to this situation. Last week, Satang Corp. revealed plans to host an STO (security token offering) in Thailand with the blessings of their local government.
The 4 Most Common Types of Security Tokens
Security tokens are revolutionizing the way we conduct business on a global scale. These unique blockchain based protocols provide traditional investors with a safe way to enter the cryptomarket. You should expect increased adoption as investors continue to learn about the benefits security tokens provide.