Cryptocurrencies have been around for long enough to transform into the monetary backbone of investment and start-ups. The world has been propelled by the power of Initial Coin Offerings (ICO). To harness this power, however, there have been many companies that emerged on the landscape to provide future investors with the ecosystem to manage their own assets, create successful business plans and generally push their business towards a growth-factor.
The world has been agog with the word Initial Coin Offering, which has been burning deep markings at the back of many investor’s heads. The Securities and Exchange Commission has been particularly sensitive to this trend, cracking down on possible fraud-schemes all across the spectrum and issuing multiple subpoenas to contain the damage of fraudulent activities pertaining to Bitcoin and ICOs.
The CEO of Overstock, one of the major ICO companies in the United States is currently under review of SEC. With so many top nobs of the crypto industry coming under regulatory fire, we could not help but ask ourselves if there is not a safer way to raise money through cryptocurrencies.
What about security token offerings?
Overstock CEO Patrick Byrne has been quite happy to extol the virtues of this new term and explain that it has to do with ICOs, only this time the game is much more secure. In Mr Byrne’s own words, there are a ‘distinct differences between ICOs and STOs.’
If you think that Overstock has just been advertising some outlandish ideas, think again, because the company has invested another $2.5 million in three-wheel car start-up Elio Motors. For its part, the car manufacturer has said that it will launch its own ElioCoin product and specified that unlike other cases, this new it will be a security token offering.
The process itself has been confided to Wall Street expert traders JonesTrading Institutional Services.
Byrne has commented that the mulled, and de facto, rolled-out STO, the whole model for how cryptocurrencies are used as the means to raise capital and invest that money into meaningful undertakings.
Estimated $9.8 billion was invested in ICOs alone in 2016. However, with regulatory heat coming from the likes of the Securities Exchange Commission.
Now, here lies the idea of Byrne to completely revolutionize the whole industry. With ICOs, people receive UTILITY TOKENS, which are useful within an ecosystem, but they do not necessarily translate into any real-world value. Instead, people opt to back those ideas, knowing too well that they may not receive any return on their investment under any circumstances. And yet people are quite willing to invest sufficient amounts of money and back their claims that the future of cryptocurrencies will revolutionize all industries, from how CIOs are run to the video games industry.
Security token offerings will change that constant state of insecurity. Instead of worrying over particular aspects of a given transaction, such as the lack of monetary value, traders will be bound by common laws that are very common in the financial system as we know it – the principle of every tradeable or purchasable asset of having real-world value.
In other words, SOT assets will have real-world monetary value, which will not be contingent on an idea and the success of the project. These real-world indicators can be quite likely to what you would expect from a normal company, including profits, revenues, and other assets.
Why Could STOs Be the Future?
Plain and simple, ICOs do constitute securities, according to SEC Chairman Jay Clayton who came out with a statement that moving forward, all ICOs will be treated as securities. In other words, companies that organise ICOs will have to adapt, hence the prescience of Overstock, which has been quick to cotton on and grasp this new conceptualized idea.
Another pernicious thorn in the side of everyone who has been trying to avoid is that many CIOs are backed by nothing but the idea to raise money and then disappear. An arguably crypto bank was shut down and then disappeared from the Internet, possibly hightailing with thousands of dollars worth of investment.
ICOs do hold a deal promise to transform whole industries, but the obvious downside to that is we never know if we can trust whoever is issuing this.
One way to do this Byrne estimates is to adopt STOs en masse. Arguably, people will be just as successful if they chose to handle matters in a similar way, by obliging companies who deal with ICO launches to actually show accountability for what they are doing.