What is an STO?
If you’re not sure what an STO is, here’s our guide on the basics.
What is an STO?
An STO refers to Security Token Offering, which is very similar to an ICO (initial coin offering). Upon investment, a token is given to the investor, which represents the investment they’ve put into a new form of cryptocurrency.
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However, this token is used to represent an investment into something like stocks or underlying assets or bonds, rather than a new type of currency with barely any value. This is how an STO helps to bridge the middle ground between an ICO and an IEO (initial exchange offering).
Are STOs Regulated?
Depending on the country a person is working in, this may vary. Many countries have long and detailed plans regarding the handling and verification of crypto assets, like the United States and the United Kingdom.
However, many countries, like China and India, have banned their use.
A Big Benefit of STOs
STOs carry a reputation of having a lower risk than ICOs. Security tokens have more laws around them, and there are physical assets involved, ensuring that it has real value.
A Big Drawback of STOs
There’s a lot of regulation burden concerning the use of STOs. They cut out the middleman in the investment process, meaning no bank is involved. This only increases the workload of an STO platform, and the amount of administration can slow down the process.
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