Security token exchange is making a significant impact in the evolving crypto trading industry. But when it comes to wide acceptance of security token, liquidity emerges as a major challenge.

In the case of STO, liquidity denotes to the easiness and constancy with which a token/asset can be purchased/sold in the marketplace.

If you have invested heavily in the 2017 crypto space, you probably did really well. But it’s 2018 now. With the emergence of SEC and its regulations, the functioning of ICO might change. So, we are going to dive in and take a look at how things are going to be different with security token offerings. Let’s start with the challenges.

The Challenges

Most crypto projects refer their tokens as utility tokens which are designed to offer holders a way to take part in the network. However, there are plenty of these tokens are still used to increase money for different projects. In return it expects high ROI for investors who then trade it on secondary platforms.

The market will be drowned with more experienced investors who take advantage of smaller investors. They are dominating & suppressing decentralized finance, block attempts at major crowd funding networks.

Large investors receive deals from private sales, dump tokens as they have got listed, generate an instant profit while decreasing the price for less experienced and smaller retail investors who funded more and expecting for a return.

“A token, a digital asset, where I give you money and you go off and start some venture…and in return for giving you my money, you say, ‘You know what? I’m going to give you a return’, or you can get a return in a secondary market by selling your token to somebody… That is a security and we regulate that. We regulate the selling of that security and we regulate the trading of that security. That’s our job, and we’ve been doing it for a long time,”

– said SEC Chairperson Jay Clayton, in a June 2018 CNBC interview.

With ICO’s being utilized to dump different schemes without providing any path for redemption, it is being very problematic for investors to establish trust and participate in any crypto project. This is the scenario where we need Security Token Offering.

What exactly the Security Tokens & STO

Securities are defined as tradable financial assets, and security tokens are blockchain based digital assets that are stored cryptographically. It enables investors to own a tradable asset. They offer the investors a range of financial rights, like dividends, profit share rights, equity, buy-back rights, and much more. It is the same as ICOs, but the difference is that STO provides security tokens instead of utility tokens. STOs are introduced to provide legal protections for investors in the crypto community. We can expect a boost in the number of STOs in the latter half of 2018.

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