Security token offering (STO)

Security token offering (STO) is a method of fundraising in which digital tokens are sold to investors in exchange for investment. STOs are similar to initial coin offerings (ICOs) but with an important difference, they comply with securities laws, which ICOs did not. STOs are more regulated and provide more legal protection to the investors as they are backed by real-world assets, profits and/or dividends. STOs function in a more transparent and regulated environment by complying with the regulations laid out by the financial authorities. In essence, STOs represent a more legitimate, safer and legally compliant version of ICOs. They have emerged as a popular mode of fundraising for startups as they provide fractional ownership in the company, better governance, and reduced cost of capital. Investors receive more control over their investments, and issuers get access to a larger pool of capital.