Tokenization is becoming more and more popular in various business areas, from real estate to natural resources. As a result, more and more companies are interested in how to tokenize their assets and what it will give them in the end.
Stobox has extensive experience in tokenizing assets for clients around the world.
In this article, Stobox experts explain what an STO and security tokens are and why security token offering is an effective solution for companies that need to raise capital.
What is a security token?
Before learning what an STO is, it is worth understanding the concept of security tokens.
A security token is a digital equivalent of security issued during an STO. Such digital assets may have different functions. For example, they can be used to confirm the ownership of a share, the right to receive dividends, a share of profits, etc.
Smart contracts set the characteristics of security tokens. The peculiarity of this technology is that the smart contract is executed after both parties fulfill their obligations only.
Various types of assets can be tokenized, for example:
- Public capital
- Private capital
- Real estate
- Monetary obligations, etc.
Unlike any other types of tokens, security tokens are always tied to real assets. In many jurisdictions, they are considered securities, so companies that issue them are required to comply with the requirements of regulatory authorities and file reports.
Another important factor behind the growing popularity of security tokens is guarantees. If the project is declared insolvent for some reason, investors will be able to assert their rights through regulatory authorities or in court.
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SEE ALSO: South Africa Regulatory Body, IFWG, Highlights the Potential Benefits and Risks of Tokenisation
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