“An STO, also known as a Security Token Offering, is a digital token supported by blockchain technology that represents a stake in an asset. STOs enable digital funding, while still complying with government regulations. Security tokens require extensive regulations, so they are not traded on regular token exchanges. However, they are similar to ICOs (initial coin offerings) in that they are fungible tokens, meaning that they hold monetary value.
STOs function as digital representations of real-world assets, like bonds, stocks, or even gold. Because of this, security token offering services enable asset tokenization for many businesses.
STOs (security token offerings) were created in response to the ICO (initial coin offering) bubble burst in 2018. After the crypto market cap fell by over $750 billion, regulatory bodies began emphasizing more secure legislation for tokens. Some ICOs disliked the change from flexible utility tokens to securities. STOs were created as tokens that would comply with the relevant laws and regulations for securities.
Security tokens are similar to the certificates issued for stocks. For stocks, ownership information is entered into a document as an official certificate of ownership. For security tokens, similar information is recorded, the major difference being that it is recorded on the blockchain and represented by a token.” – TOKENEX
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