Security Token Offerings, STO’s, are set to transform crowdfunding in the United States for 2019. However, it is imperative that STO issuers are not just competent business folks but that they are committed to investor transparency, communication and securities law compliance.
Initially, security tokens will be offered pursuant to the SEC Regulation D Rule 506(c) registration exemption. This type of offering is for “accredited investors” only; in other words, people that can prove they earn over $200k a year or $1 million net worth. Hardly the blockchain promise of the democratization of securities issuances for all investors. However, our fledgling security token landscape is rightfully taking a cautious approach before offering tokenized securities to the broader public.
Trustworthy STO’s must offer investor protections such as issuer disqualification provisions for felons and “bad actors”, adherence to Rule 506(c) resale holds and, of course, enforced insider trading restrictions on any post-STO secondary-trading markets.
High quality decentralized blockchains like Ethereum offer the transparency and immutability that investors need. Ethereum’s de-facto security token issuance standard of ERC-20 offers flexibility for issuers, transparency for investors and enforcement for the regulators.
From the outset, STO investors must trust the issuer. Using a distributed, trustless blockchain technology for an STO guarantees investor protections and regulatory compliance.
After demonstrating investor and regulatory protections for accredited investors, it is a small step for issuers and regulators to deliver on the blockchain promise of unrestricted STO’s for all, subject, of course, to SEC review.
Check out https://tokenetics.com for more information on how to compliantly raise capital for your business using an STO.