Security token offering (STO) emerges as new funding vehicle

Many blockchain developers are likely to raise funds through the Security Token Offering (STO) from this year, moving away from the past when they relied on initial coin offering (ICO).

Then what is the difference between STO and ICO? The two have both similarities and differences. They are similar in that they are vehicles for corporate capital raising. They are different in risk. STO is safer than ICO because the STO is regulated while ICO is unregulated.

STO is a token offering from a firm or an organization to raise capital for its project. Investors buy digital tokens.

Investors have shunned ICOs because they are exposed to a higher risk due to the unregulated nature of ICOs.

As is widely known last year, many South Korean investors lost money from fraudulent ICOs issued by fraudsters.

The main difference between an STO and an ICO is that STOs are regulated while an ICO is unregulated.

In the United States, issuers of STOs must register themselves with the Securities Exchange Commission (SEC).

This registration with the regulator weeds out many fraudulent individuals and opens the door only to the legitimate and technologically viable projects.

Many investors have strong confidence, and the market capitalization would top $10 trillion worldwide by 2020.

STO is similar to the stocks issued by companies listed on the stock exchange. However, it is still an open question whether the South Korean Financial Supervisory Service would legalize the STO as the US SEC did.