STOs To Lead The Way Forward As We Bid Adieu To ICOs

By Swati Kishore

If the past few months are something to go by, then the news that financial institutions have finally started to warm up to the revolutionary technology of Blockchain is quite something. This revelation comes across as more and more institutional money goes into the crypto market. A consequence of the influx of institutional money into cryptocurrencies will be increased prices of these very digital currencies.

Many startups that initially began as crypto firms have now obtained the regulatory framework needed to cater to the needs of institutional investors. For example, California-based Blockchain security company, BitGo has earned a charter from the South Dakota Division of Banking. As the excitement for Initial Coin Offerings wanes, more and more crypto firms are going after institutional investors. The downturn in ICO’s comes amidst the loss of value of tokens associated with decentralized applications post the pushback from the U.S. Securities and Exchange Commission.

As most ICO’s were in breach of the registration rules for securities, the regulatory framework laid out by the SEC is now giving rise to STO’s or Security Token Offerings. As compared to ICOs, STOs aren’t all that revolutionary. While ICOs come with their unique ecosystem which includes a model for rewarding behaviour within decentralized networks, STOs, on the other hand, are just crypto versions of the traditional financial assets such as equity.

Even though STOs are not as transformative in nature as ICOs, yet these security token offerings have the potential to make a big mark in the world’s economy. Smart Contracts can facilitate the efficient management of cap tables. STOs will also be able to forego the need of intermediaries such as underwriters to give a direct issuer to investor framework. In fact, the Blockchain consortium founded by some of the largest banks in the world, R3 has already called STOs as the driving force behind the third Blockchain revolution. While it may sound like a hyperbole, one cannot deny the fact that in the world of increasing regulations surrounding token offerings, STOs will be the next way forward for startups to secure money for their revolutionary ideas and build them into viable products.