The cryptocurrency and blockchain industry has experienced tremendous growth and innovation in recent years, especially with STO and crypto.

As the space continues to mature, new concepts and applications are emerging that offer additional opportunities while addressing some of the issues faced by earlier blockchain projects.

One such development is the rise of security token offerings, or STOs. In this blog post, we will explore what STOs are, how they differ from traditional cryptocurrencies, their potential benefits, and how investors can participate in this burgeoning asset class. Let’s continue!

What is STO in crypto?

A security token offering, or STO, refers to a blockchain-based crowdsale of a digital asset where the tokens issued represent traditional securities. Some common examples of STO include tokenized stocks, bonds, real estate, investment funds, and even artist royalties or collectibles.

The STO process allows companies to sell securities and raise capital by issuing digital tokens on the blockchain. For investors, STO in crypto unlocks new opportunities to back promising startups and projects at a reduced minimum investment.

STO platforms handle regulatory compliance issues, such as accreditation checks, and file required documents with financial regulators. For further information about STOs, check out “ICO and STO”!

What is the purpose of using STO?

There are several advantages driving the adoption of STOs. For businesses, using STO provides a new avenue to raise capital without relying solely on venture capital or traditional equity funding. A global audience of individuals can participate, reducing the barrier to entry.

For investors, STOs increase accessibility by allowing fractional ownership of assets typically restricted to institutional or accredited investors. Blockchain also brings much-needed transparency to private securities markets.

Additionally, asset tokenization unlocks new forms of capital, such as security-backed crypto loans. STOs harness the power of blockchain technology to streamline capital markets while maintaining important regulatory safeguards for all participants.

What are the benefits of STO?

Some key benefits of STOs include:

Increased liquidity

Distributed crypto exchanges allow for 24/7 crypto trading of digital assets, improving liquidity over privately held securities.

Fractional ownership

Crypto tokens can represent fractional ownership, lowering the minimum investment amount required. To explore this concept further, make sure to check out "Tokenization," “Cryptocurrency Tokenization," and “Benefits of Tokenization.”.

Transparency

Transactions recorded on public blockchains increase transparency around token ownership transfers and crypto lending and borrowing activities.

Automation

Smart contracts can automate processes like dividends, capital calls, and shareholder voting events without third-party administrators.

Global reach

STOs allow companies to raise funds from a global investor pool rather than limit offers to a single jurisdiction.

Potential gains

Holding crypto tokens enables participation in company upside if the underlying asset increases in value over time.

With proper regulation, STOs promise to modernize private capital markets through greater access and efficiency gains using blockchain technology.

How big is the STO market?

The STO market experienced steady growth after emerging in 2018 and is now a multi-billion dollar industry. Market data indicates that the first ten months of 2019 saw the successful completion of over 380 STOs globally, raising a total of approximately $4.1 billion.

Hong Kong, the Cayman Islands, the United Arab Emirates, and Singapore are the top countries for STO activity based on the funds raised.

As the sector matures further, the STO market shows strong potential to radically reinvent private capital markets. Reliable and fully regulated issuers like Cryptobunq are helping to build institutional trust in STO technology and compliance standards.

Cryptobunq is a secure crypto-as-a-service company that provides expert solutions such as crypto checkout and invoicing, crypto batch payments, tokenization solutions, crypto exchange API, and more. With all the services in one place, CBQ is a one-stop-shop crypto service provider.

If you would like to explore the expertise of CBQ and its solutions, make sure to check out our case studies for the latest Web3 reports. You can also follow CBQ blogs to learn more about the crypto and blockchain ecosystems and grow your projects!

What is STO trading?

With STO tokens, investors gain the ability to trade 24/7 on distributed exchanges, like traditional cryptocurrencies. Investors conduct STO trading by exchanging tokens for fiat currencies or digital assets. Leading exchanges offer a variety of order types, including market, limit, and stop-loss orders.

Advanced crypto traders may also engage in margin or crypto derivative trading involving STO tokens, although regulations still vary by location.

With further standardization, many predict STO transactions will become as seamless as trading equity shares today. Secure stablecoins, such as EURK, also make ideal transaction settlements because of their price stability. Secure platforms such as Cryptobunq are also essential for maximum security in trading.

How do I use the STO exchange?

Follow these basic steps to begin trading STO tokens on the STO exchange:

• Register for an account on a supported STO exchange. KYC/AML checks are required in this step.
• The exchange payment options support either deposit-supported cryptocurrencies or fiat currencies.
• Browse the available STO tokens and read issuer investment disclosures and whitepapers.
• Create a buy/sell limit or market order for the desired tokens. Orders match instantly, or when conditions are satisfied.
• Withdraw or deposit tokens to your personal ERC20 wallet or linked exchange account. If you do not have one, you can benefit from CBQ custody and wallet solutions. Check out “How to set up a cryptocurrency wallet?” for more details about the process!
• Monitor your portfolio, check market prices, and set alerts for STO trading opportunities.
• Engage with project communities and manage tokens long-term, just like you would traditional equity shares.

A regulated STO exchange simplifies participation in this new digital securities market. Cryptobunq integration also adds robust security for your transactions.

How do I create an STO token?

Currently, creating STO tokens requires adherence to security regulations, which can be a complex process. Many companies utilize licensed crypto fundraising platforms that handle the technical and regulatory requirements. This generally involves:

• Forming a corporation and submitting the necessary documentation to regulatory bodies
• Drafting a whitepaper, investment terms, and disclosure documents
• Engaging legal counsel to ensure tokens meet 'safe harbor' rules
• Partnering with an STO issuance platform that can issue or host the digital securities
• Conducting an audit of financials, ownership, and token smart contracts
• Marketing the offering and onboarding investors on the platform
• Setting up post-investment token management procedures

Promising initiatives by established platforms like Cryptobunq bring much-needed reliability to STO projects through measures like auditing, insurance, and regulated on/off ramps. Our expert blockchain solutions provide a compliant head start for new entrepreneurs as the industry takes off.

The bottom line

Security token offerings represent the next stage of innovation in blockchain-based finance. By blending traditional securities and cryptocurrency concepts, STOs bridge traditional capital markets with the distributed efficiencies of blockchain technology.

With use cases emerging across real estate, private equity, and more, STOs unlock new opportunities for both businesses and investors.

As the market matures, security tokens may become the standard method for issuing, trading, and managing securities globally through a more accessible, inclusive, and transparent digital infrastructure.

With greater regulatory clarity and support from compliant gatekeepers like Cryptobunq, the STO industry shows strong potential to transform private investing. Contact us today and start to explore CBQ solutions for prospective business growth and adaptation to the future!