A security token offering (STO) describes a public offering of security tokens - i.e. of values, rights or debt relationships (=securities) that are mapped via digital assets. The technical basis for this is provided by blockchain technology, via which the digital securities are issued and subsequent transactions are validated.
While Initial Coin Offerings (ICO) can have many reasons, STOs serve exclusively to generate equity or debt capital.
At the beginning of 2019, the German Federal Financial Supervisory Authority (BaFin) classified security tokens as a fundamentally tradable asset value and approved the first securities prospectus for a security token offering (STO) in Germany. Regulators thus treat them like traditional securities in regulatory terms - with all the associated rights and obligations. For example, issuers are required to prepare a so-called securities prospectus as part of an STO. Before the security token can be issued, the relevant regulatory authority must approve it. In addition to important information for investors, the prospectus must therefore always clearly define the funding objective of the Security Token.
Furthermore, issuers are obliged to identify the buyers of the tokens in advance via a so-called Know your Customer process (KYC). In order to relieve issuers and investors as much as possible, iVE.ONE basically provides all platform users with a fast and efficient KYC process.
STOs represent the blockchain equivalent of initial public offerings (IPOs), but have significantly more areas of application and advantages. The biggest advantage is that in an STO, unlike an IPO, limited liability companies can also issue regulated securities - so companies do not have to form a public company first. In addition, participation rights to specific projects can also be issued via an STO, whereas with an IPO, participation rights are linked exclusively to the success of the company as a whole. In addition, the issuance of security tokens is significantly more time and cost effective than the issuance of traditional securities.
Investors benefit from the first fully regulated investment case in blockchain applications. Unlike the issuance of coins (ICO) or NFT, the regulated STO process offers tremendous securities on the investor side and also qualifies it for institutional investors interested in trading digital assets. In addition, security tokens can be traded directly (peer-to-peer, P2P) on the secondary market after the initial issuance (STO). This saves intermediation costs and makes Security Token an attractive asset class.