Security Token Offering (STO): Explained

Elizabeth Wright
| Editor:
July 20, 2023
5 min read

What is an STO?

STO represents Security Token Offering. A big contrast for an STO (when compared to its closest competitor ICO) is the supporting asset of the offering by something, that can be classified tangible, as resources, revenues, or income of an organization. At the point when STO is up for grabs, you are offered to buy a piece of the potential control of the organization.

The main benefit of an STO is that the tokens are liable to government protection regulations. This makes them completely different to the assets sold throughout ICOs, which the U.S. Protections and Exchange Commission (SEC) has no protection on, which makes it rely on the individual conditions associated with the deal.

Long story told short, STOs keep the investors safe and sound from the scam and money laundering, as well as putting liabilities on the project creators to keep the promises and develop the project according to the plan.

Why do we need STOs?

With the appearance of ICOs on the wide investing market – it was clear, that the new technology of crypto crowdfunding will be a booming success at any point of time. More than 1000 of seriously maintained and well-established projects were propelled and put to work for the common good, while the crypto market has been receiving a boost of trade.

But with the ICO fever came some large problems. The technology wasn’t secure at all! With each 1 successful project came 3 scams, and some of them were so gargantuan it is not even possible to imagine, how could their organisers steal so much money, and leave without any trace or persecution.

What regulations STO has?

United States Securities and Exchange Commission is the most important player in the regulation of STO and Security Tokens. While this information may not sound astounding, they were the ones who were most dynamic in fighting the illicit collecting of cash through the ICO, when protections were sold under the disguise of Utility tokens. Also, as of that right now, we can comprehend the American protections market as the most trustworthy component against fraudulent projects like BitConnect, Pincoin and so on.

With the help of governmental structure, the community will have a direct access to such regulations as: Regulation CF (Regulation CrowdFunding), Regulation A (Regulation A+, Reg A, Reg A+), Regulation D (506b & 506c) and Regulation S, which to simplify, all stand for protecting the right of an investor to know, where their money is going, and what really awaits the projects in the future.

What are the differences between the STOs and ICOs?

The differences within the realm of ICOs and STOs can be easily grouped as follows:

In STOs, investors are protected by multilayered buffers, including government and guarantees.

In STOs, every investor has to pass a special check-up and multiple barriers, and after all that, the investor will have their own limits on the amount of invested funds, and the amount of tradable assets they will receive.

In STOs, the value of the token, or currency, is not based on the immediate market speculations, rather on the amount and ratio of fiat and cryptocurrency intact.

In STOs, it is virtually impossible to commit any sort of fraudulent activity through scamming and stealing investors’ money. Having to pass through countless stages of governmental verifications while maintaining tight relations with other security measures implies, that only the strongest and most confident projects will prevail on the scene.

ICO Scams

Pincoin and iFan

The hugest ICO scam so far has officially snatched in April of 2018. Two ICOs, were run by the same Vietnamese organization. It is speculated, that the creators have gathered and therefore stolen as much as 660 million USD.

The responsible organization has rapidly vacated all the premices from the Ho Chi Minh City almost a year ago, taking all the investors cash with them, and leaving an absolute silence behind them. The scam has been classified as the biggest one in the short history of cryptocurrencies.


The main point of the project was for clients to trade Bitcoin for Bitconnect Coin (BCC) on the launch stage in January of 2017. All the investors were guaranteed a cosmic amount of profit, reaching up to 1000%. Clients were also encouraged to loan BCC to their own friends, in order to saturate the platform with its own currency.

For a long time, the project was blamed for being a Ponzi scheme, and after some sharp pressure from the initial investors, Bitconnect has suspended all its activities on January of 2018 in the wake of a cease and desist order from a couple of financial regulators.

Various clients have since propelled a legal claim against Bitconnect to recover lost assets – adding up to $700,000 for their specific case.

The conclusion

STOs, when they accord with administrative requirements, is unquestionably appealing to any sorts of financial specialists, not only because of decreased risks, proficiency and the straightforwardness and transparency of the record but because of the improved assurance for each side associated with the exchange.

With humanity progressing further into the future, we would probably be observing the expansion of the STO technology, putting ICO to a great deal of distrust and question, and finding a balance between the security and transparency when it comes to selling stocks and the assets of your project.

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