The STO or “security token offering”

 


It had to happen, it was the next logical step

In previous blogs we have talked about the tokenization of the cultural and natural heritage of the states, in another of the NFTs , also related to tokens and blockchain-based technology.

Therefore, it was to be expected that this digital financing revolution would come to compliment, rather than replace, traditional company financing systems.

The STO or “security token offering”

STOs are cryptographic assets based on blockchain technology linked to a traditional financial asset. In short, they are the same traditional financing instruments, only “tokenized”.

This means that they grant the same rights that that financial asset would grant in the traditional market.

If it is a debt or a participative loan, the subscriber will receive the established yield (whether fixed or linked to the yield), if it is a loan or a convertible bond, the subscriber may receive a capital participation, etc.

Advantages over traditional financing systems

But then, what advantages do these instruments have over traditional financial markets. We can highlight the following:

  • Less costs. Although we will have to go to some investment service and participatory financing platforms, we will normally avoid the costs associated with issuing debt or other traditional financial assets.
  • Greater liquidity for the small investor. The tokenization of the asset will allow the minimum value to be invested to be smaller, which together with the speed that accompanies digital processes and the lower commission costs will make this product more attractive for the small investor. In addition, the digital nature of the asset will promote the sale in cryptocurrency, which will add an extra liquidity.
  • Visibility in the digital world. The mere fact that we use this type of financing will make us more visible on digital platforms and will attract potential investors used to operating in a digital environment.

All this, without forgetting the need to always have the appropriate professional legal advice. If the issuance of financial assets requires correct commercial advice, its association with the digital world even more so, since we are in an emerging sector.

In addition, the digitization of an asset will require a further guarantee of legal certainty so that the investor feels comfortable going to our asset issuances.

Even so, we understand that the advantages of associating traditional financing and the digital world are greater, especially for SMEs that do not usually have access to traditional financing channels beyond bank loans.

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