Security Token Offerings (STO) are a secure and reliable alternative to raise capital for businesses and projects. This token is subject to regulations laid down by the Securities and Exchange Commission (SEC) and hence it is classified as a security token. Unlike Initial Coin Offering (ICO), investors of STOs receive shares or equity stakes in exchange for their investment. STOs are also backed by tangible assets that help ensure an investment against any uncertainties.
A security token launch refers to the entire process of creating a business plan using blockchain and successfully marketing it using this medium. A token launch involves multiple phases and they have been listed below:
Preliminary Stage: Here, an entrepreneur develops an idea and goes about checking its demand and scalability. Additionally, one will also go about selecting an appropriate blockchain technology such as ERC-20 or Quorum, to host the STO. A white paper will also be published which lists out the details of the project. An entrepreneur will also use this time to assemble a team as well as launch associated websites and social media handles.
Intermediate Stage: This stage will see the creation and launch of the STO. Usually, the entrepreneur will also invite a closed group of investors to purchase the security token before it is made available to the public.
Investor Stage: Here, the STO is available for purchase on the market however, it is limited to only certified investors.
Product Development and Launch Stage: This is where the security token launch process comes to an end. The entrepreneur will receive the funds raised by exchanging STOs and will begin work on developing and scaling the product.
Functions of a Security Token Platform
A security token platform is used for displaying and marketing STOs to a variety of investors. These platforms also help make the process of fundraising a smooth one for both the entrepreneurs and investors. There are a number of functions that a security token platform has to undertake to protect the interests of its users. They have been listed below:
Token Issuing
The primary function of a security token platform is to allow entrepreneurs to register tokens as well as allow investors to purchase them.
Legal Verification
The hosting platform should also ensure that the displayed tokens do not violate any legal clauses or are benefitting any illegal activities.
Regulatory Compliance
Since STOs fall under the purview of governing authorities such as the Securities and Exchange Commission (SEC), the hosting platform should ensure that the security tokens displayed are compliant with prevailing regulations.
Custody of Assets
The platform should also conduct background checks of the token issuer and verify the value of the assets mortgaged for the security token. Additionally, in case of disputes, the security token platform should also act as an arbitrator.
Token Trading
Like any other cryptocurrency exchange, a security token platform should have the facility to allow its users to trade tokens.
Liquidity Options
A crucial factor determining the success of a token platform is the ease of converting cryptocurrency or digital assets into fiat currency and vice-versa.
Nowadays it is very easy to launch and manage a security token service. Infinite Block Tech is a premier company that excels at security token platform development and can help you with all your business queries.
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