Editor's Note: This article comes fromOstrich BlockchainEditor's Note: This article comes from
Ostrich Blockchain
(ID: MyTuoniao), author: Qiu Feng, reproduced with authorization.
Security Tokens (STOs) will inevitably transform equity just as Bitcoin transformed money, as they provide owners with immediate, liquid economic benefits and fast delivery of yield. Every type of ownership can be tokenized, which is a huge multi-trillion dollar market. ” (Carlos Domingo, founder of SPICE Venture Capital)
Since the beginning of this year, several rounds of heated debates between Meng Yan and Yuan Dao, representatives of the Token School, have opened up a debate on the Token Economy, making the concepts of blockchain Token Economy and "currency reform" well known .
However, the "currency reform" is also facing a series of outstanding problems, such as serious information asymmetry between investors and project parties, no supervision, unclear rights and responsibilities, etc. These inevitably make investors who are full of expectations for the "currency reform" feel a little bit disappointment.
Recently, STO (Security Token Offer), a kind of token issuance under the regulatory framework of legal compliance, has been frequently mentioned. Its appearance seems to have given the market a prescription, and these long-standing problems may be solved.
Blockchain IPO under the dual protection of supervision and rights and interestsSome time ago, the New York Department of Financial Services (NYDFS) approved the stablecoins GUSD and PAX, making stablecoins included in the regulatory framework for the first time. As soon as the news came out, it immediately aroused strong reactions from the market. For a long time, the unregulated stablecoin USDT has been regarded as an unexploded bomb, and its opaque finances have caused concern.
The same problem also appears in the process of issuing cryptocurrencies. Due to the lack of regulation, blockchain teams used initial coin offerings (ICO) to raise funds to develop projects in the early days,
After obtaining the funds, the project team is unsupervised, and the progress of the project and the use of funds are difficult to be controlled by investors. In this way, the cost of the project team’s crimes is extremely low, and the project team with rights and no responsibilities begins to act recklessly in the vacuum of supervision. Many investors suffered heavy losses.
More importantly, although investors invest in blockchain projects, what they get is only a utility token (Utility Token, UT, whose value is largely theoretical until the application is developed. So far), rather than the equity corresponding to the real stock, that is to say, investors have no actual rights and interests.
The emergence of STO will change this situation institutionally.
The certificate issued by the STO model is called Security Token (Security Token/Security Pass), which is supported by certain financial assets or rights in reality, such as company equity, creditor's rights, gold, real estate investment trusts, and blockchain systems. Dividend rights, etc., investors own the content behind this right. Therefore, it has intrinsic value from the moment of issuance, unlike a use token.
Additionally, STOs are designed to be fully compliant with regulatory frameworks, allowing investors from around the world to participate without violating respective securities laws.
Compliance is especially important in countries like the United States that have strict regulations on securities and investments. In the US, STOs are subject to license approval from the SEC and other regulatory agencies. They allow companies to create whitelists and blacklists, which ensures that companies comply with know-your-customer (KYC) and anti-money laundering (AML) requirements. Through more transparent operations, STO can effectively avoid some problems faced by utility tokens, such as project dereliction of duty, fraud, and running away.
Under the double protection of rights and supervision, STO has corrected all kinds of chaos in the previous ICO, making the investment in blockchain projects more standardized and sustainable. From this point of view, STO is more like the blockchain world IPO in.
From the entrance to the exit, there are companies that have tried first
This year, many companies have been researching how to use STO to provide secure cryptocurrency transactions for cryptocurrency investors and project parties.
Currently, companies like Polymath and Harbor are busy developing standard restrictions for asset tokenization and security assets; the first exchanges dedicated to STOs have just launched.
Polymath, which hopes to use the advantages of blockchain technology to reform the existing capital market infrastructure, is one of the pioneers of STO.Polymath is a blockchain protocol that can issue SEC-compliant security tokens. The protocol simplifies the process of creating financial products on the blockchain by embedding financial security requirements into the design of security tokens. The advantages are that businesses can finance seamlessly; assets cannot be forged in instant settlements; and transaction fees are low.
On Polymath's official website, the ST-20 token standard is detailed——
A token that adds a few lines of code to the ERC-20 token, mainly to expand the functionality of the ERC-20 and make it more compliant with regulatory requirements. The use of this technology can help users limit transactions and ensure financial security, for example:
Whitelisting can be enforced to ensure senders and receivers are clearly identified;
Transfers above/below certain amounts can be prohibited;
Some token transfers can be restricted;
Certain addresses may be blacklisted.
According to the rules, token issuers are required to verify accounts before holding tokens. Before executing a transaction, it is also necessary to consider whether it is in a transaction restricted state according to the status of the token holder. For accounts that do not pass certain KYC/AML/authentication checks, transactions will not go through.
Ultimately, Polymath hopes to bring all the rules that apply in the real world to the digital world through their platform.
Another example of STO adoption is Securitize. Securitize is a regulatory-compliant cloud-service solution designed specifically for the tokenization of securities to comply with regulations and simplify the registration process for investors according to KYC/AML requirements. The platform also provides customized smart contracts to meet the needs of issuers. Currently, Securitize has provided services to at least 4 companies operating ICOs, and may receive $500 million in related revenue.
It is not difficult to see that from the financing of the blockchain project team to the execution of the transaction, from the entrance to the exit, some companies are already trying to use STO to get through the whole process, in which supervision, transparency, and protection of rights and interests become the core and focus.
Global regulation still needs to break through
Although the advantages of STO are relatively obvious, and many companies have made a lot of attempts, but beyond the limitations of pure technology, you will find that the greater limitation is actually the difference in global regulatory systems. Different laws in different countries will also restrict the promotion and use of STO on a global scale.
Taking the United States as an example, the stable currency GUSD has passed the approval of the New York Financial Services Agency, but there is still no legal protection in other states, because each state has its own laws, that is to say, the compliance of GUSD is still limited to New York State .
