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The matter of difference between tokenization (STO) and ICO takes us back to 2017.
ICO (Initial Coin Offering) is the type of token issuance related to crypto and utility tokens rather than actual stocks. Utility tokens act as vouchers inside a single ecosystem. For example, to use the New York underground metro station, you must buy a ticket that will be invalid in London, so utility tokens are native tokens inside one system.
Tokenization STO (Security Token Offering) is a legal and compliant way of attracting capital via security tokens backed by real assets and running under securities laws. It’s a process of transferring a company’s stock onto the blockchain, which preserves its regulation canvas.
The introduction of a security token offering as a regulated substitute for an initial coin offering. Initial Coin Offerings were the precursor of the security token market, which is now regulated. After the ICO hype faded, people began to realize that because most ICOs were unregulated and did not impose duties on issuers, most investors were not interested in them. As a result, most ICOs did not deliver on their promise.
Tokenization vs ICO
- Utility tokens or coins
- No regulation
- Tokens that give you the right only to use them in 1 ecosystem
- Not a financial instrument
- Usually, no KYC
- Traded on traditional crypto CEX or DEX
- Very risky and often can be scam projects
- Highly regulated
- You become an official shareholder of the company
- Can be dividends and voting rights
- Backed by real assets
- Traded only on regulated CEX with relevant license, or on DEX such as DS Swap
The Stobox team is convinced security tokens are a new financial future. They combine and merge traditional finance and crypto. Stobox has its own security tokens that you can buy via its own DS Dashboard.
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.