Advantages and Disadvantages of Security Tokens.
What is a Security Token?
This token has become a boomerang for companies. security tokens are now a big problem and are considered as a new investment tool in the market. much speculation that they would wipe out trade with ICO in the long run. but it must be understood how good is STO and what should we consider with this token variant? And what is the best way to buy and store it?
Utility Token or Security Token
Roughly speaking, these tokens can be divided into 2, which are utility and security tokens. This difference is important to know not only because of the functionality of the two variants. Financial and exchange regulators, especially those who are concerned with the fact that they are stated correctly. they are the ones who make this division need consideration.
After the fatal stock market crash in 1929, the SEC was founded.
His main concern is to protect investors and ensure that securities trading is safe and legally controlled. With the increasing number of ICOs, stock exchange supervision authorities such as the US SEC are also becoming aware of new trends. the interest is increasing, especially when it turns out that many suspect
that startup is included in a fraudulent network.
As we know that securities are financial assets that can be traded such as bonds, options, equity, and warrants. Security tokens meet the same requirements and are therefore considered as securities. The SEC has several attempts to determine the category of token owner. Perhaps the best known is the Howey test, which summarizes the requirements.
4 points requirements that must be met as tokens:
- Token is an investment
- finance
Investment falls on the company or group of companies. - investors have an expectation of getting a profit from the acquisition of tokens.
- The expected benefits generated by the work of third parties.
Well, if the token has met the 4 points above, then the company must meet all the requirements that also apply to traditional security. These include aspects of prospectus requirements, ad hoc reporting requirements and liability for misinformation. if it fails when doing so this can result in a significant penalty for the provider.
Benefits of Security Tokens
Security: STO returns the reputation of the crypto investment.
Reducing costs for investors:
Traditional financial transactions incur a number of fees through various intermediaries such as bankers or brokers.
Process acceleration:
Trading is accelerated because investors and token providers are in direct contact.
More global markets:
Investing abroad can be very difficult in the traditional way.
Broader investor spectrum:
Companies can reach a broader investor base by offering products and services on the Internet.
Taxation:
The types of tokens that companies offer make a big difference from a tax standpoint.
Losses from security tokens
Young market: Trading in STO is still very new. There is no precedent.
Secondary market restrictions:
Security tokens are usually not allowed to be resold at will.
Accreditation:
Many STOs require that accredited investors participate.
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