Why Security Token Offerings (STOs) Will Replace Initial Coin Offerings (ICOs)

Different from ICOs (initial coin offerings), STOs (security token offerings) provide investors ownership over an actual asset, like a real estate asset or a part of a company’s equity.

Unlike Bitcoin (BTC) and other cryptos, ICOs basically had a good season last year. As per a previous report by Cointelegraph ICOs raised a whopping $11.7 billion last year. This figure amounts to 13% more than what was realized in 2017. Just as the crypto market rapidly collapsed last year, it appears ICOs have quickly started to lose their momentum, with the end of November 2018 been the month holding the record for the least ICO investment since 2017.

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The Rise of Security Token Offerings are Hindering ICOs

Probably the main reason why ICOs may be attracting lesser investment compared to before is the rise of STOs (security token offering). Unlike ICOs, STOs offer investors ownership over an actual asset, including a percentage of a firm’s equity or a real estate asset. Because ownership of a security token under STO has intrinsic value, this allows investors to be relatively sure that the coin they invested in will not become something worthless overnight.

It is safe to say that an STO opens investor access to a company share, monthly dividend or voice in the decision-making process of a business. STOs, just as is the case with traditional securities, have to be registered with the SEC (Securities and Exchange Commission) or any other federal or state regulator which makes it an attractive feature.

ICOs Were Popular Because Entrepreneurs Could Raise Capital With Getting a Loan or Selling Their Shares

Arguably one of the primary reasons why ICOs were booming or highly popular in the first instance was particularly because entrepreneurs who don’t have access to or can boost of any tangible product had the opportunity to raise the funds they required to build their startups without looking to the banks for business loans. Even without having to dilute their control over the company (selling their shares).

From that perspective, isn’t it safe to conclude that the ICO decline is an unwelcome return to a system that is less democratic regarding fundraising for early-stage businesses?

STOs Have Potential to Make Investment Markets More Transparent, Efficient and Secure

We can agree that STOs boost the potential to fulfill the ICO promise to turn the investment market into a more efficient, secure, and transparent space. Perhaps what has been regarded as the key benefit of security token offerings over initial coin offerings, at least from the aspect or perspective of raising funds, is that STOs are more likely to attract a larger number of investors than ICOs ever can.

Following the benefits of STOs, traditional investors are typically more likely to invest in the Securities and Exchange Commission’s regulated security tokens than delving into an unregulated wild West of markets that ICOs inhabit. Finally, it is essential to mention that security token offerings attract more crypto investors as well many of whom try not to invest in regular securities offerings.

STOs are not just taking over. They have come to stay. More and more investors will begin to embrace this fully regulated offering as time passes.


Brian Lubin is a Crypto News Reporter for Smartereum. He's well-known for his reports on the crypto markets.


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