Security Token Offering (STO)

A Security Token Offering (STO) is the process through which Security Tokens are made available to qualified investors through a sale. They are defined by fundraising platforms and procedures that adhere to the applicable securities laws regarding appropriate distribution practices in the jurisdiction in which the offering is made. This contrasts with the various practices that were associated with Initial Coin Offerings (ICOs) that were often conducted with no regard for securities laws, regulations, and practices.

While much has been written of the promises of STOs to transform the cryptocurrency space and fundraising practices across a wide range of industries during much of 2018 and into 2019, results as of Fall 2019 continue to be somewhat underwhelming, both in terms of number of completed sales and funds raised. That said, considerable infrastructure has been developed in the STO space, from advisory firms to offering platform and trading venues. This suggests that the potential exists for STOs to make a broader impact on the industry into 2020 and beyond.