What are the benefits of a security token offering (STO)?
Good question. The answer could fill a book, and probably will soon. Here is a rough outline of a few of the benefits of STOs for capital formation issuers, investment fund admins, and individual investors:
Security Token Offering Benefits for Issuers
•Cap table automation streamlines investor management and administration.
•Smart contracts make it possible to code ownership and transfer restrictions into the token. These smart contracts execute upon the advent of certain contingencies tied to each jurisdiction's laws, thus governing the token's compliance with regulatory protocols. This helps to keep issuers out of hot water with the SEC.
•Accounting, auditing, and tax reporting processes are simplified.
•Primary and secondary market liquidity opportunities are much more significant with tokenized securities. Over time, as security token trading becomes more prevalent, these liquidity opportunities will become liquidity realities. It is at that point that the market for security tokens will accelerate quickly.
•Private Equity funds and Venture funds can offer their LPs an early exit. In fact, entire funds may more easily choose early liquidation when there is a strategic or tactical advantage in doing so.
Security Token Offering Benefits for Investors
•STOs open the door for retail investors to invest in private funds, commercial real estate, startups, and mid-stage companies.
•Transparency - Security Token Offerings are regulated. Blockchain provides a method of immutably verifying and tracking investor data.
•Trades on a blockchain settle in a matter of minutes rather than days.
•Compliance is semi-automated, opening the possibility that someday soon, security tokens may be freely traded anywhere they are deemed compliant.
Good question. The answer could fill a book, and probably will soon. Here is a rough outline of a few of the benefits of STOs for capital formation issuers, investment fund admins, and individual investors:
Security Token Offering Benefits for Issuers
•Cap table automation streamlines investor management and administration.
•Smart contracts make it possible to code ownership and transfer restrictions into the token. These smart contracts execute upon the advent of certain contingencies tied to each jurisdiction's laws, thus governing the token's compliance with regulatory protocols. This helps to keep issuers out of hot water with the SEC.
•Accounting, auditing, and tax reporting processes are simplified.
•Primary and secondary market liquidity opportunities are much more significant with tokenized securities. Over time, as security token trading becomes more prevalent, these liquidity opportunities will become liquidity realities. It is at that point that the market for security tokens will accelerate quickly.
•Private Equity funds and Venture funds can offer their LPs an early exit. In fact, entire funds may more easily choose early liquidation when there is a strategic or tactical advantage in doing so.
Security Token Offering Benefits for Investors
•STOs open the door for retail investors to invest in private funds, commercial real estate, startups, and mid-stage companies.
•Transparency - Security Token Offerings are regulated. Blockchain provides a method of immutably verifying and tracking investor data.
•Trades on a blockchain settle in a matter of minutes rather than days.
•Compliance is semi-automated, opening the possibility that someday soon, security tokens may be freely traded anywhere they are deemed compliant.