Security tokens have gained a massive traction in the cryptocurrency space. The high popularity among investors and traders has caught the attention of experts. They predict that in the next ten years, security tokens could become a multi-million dollar market.
The financial regulatory bodies are cramping down initial coin offerings by creating stringent measures that most companies are unable to meet. Security token offerings (STO)p are a worthy alternative with companies such as Nasdaq and Coinbase reported to be planning to invest heavily in them.
Here are four reasons why security tokens are dominating the cryptocurrency industry.
Their Intrinsic Value
Security tokens are a representation of the underlying interest in a debt or equity position, voting rights, profit sharing, dividends, and other benefits accorded to the holders. One of the main differences between them and utility tokens is that the latter are meant to represent future access to a service or product that will be offered by the issuing company.
Security tokens offer ore value to the holders at a significantly reduced risk. Concisely, intrinsic value means that the security token is worth something currently. The worth can be gauged by the value that it offers the holder.
It is also important to note that security tokens are considered as investments. This is because they have a basic structure, processes, code of conduct, rights, and corporate governance.
STOs (Security token offerings) give investors an opportunity to get full details of the tokens on a diluted basis. That is, the investors are given information about the total number of tokens given, promised, or encumbered. The three pillars of a securities market are:
- Cushioning investors from unprecedented behaviours such as external fraudulent activities
- Healthy capital information
- Implementation of compliance controls that are meant to maintain order and fairness in speculative markets
Virtually all accredited STOs meet all these requirements as they have an immutable transparency framework. This framework ensures that the three objectives are achieved.
Investors both retail and institutional gravitate towards STO that have complied with all the set regulatory requirements. The regulations enhance efficiency, set clear threshold that promote transparency, and enhance level of indemnity.
As noted by Ethereum World News, some of the regulatory bodies such as the United States Securities and Exchange Commission categorize initial coin offerings as securities. Such categorization hinders most ICOs from achieving their set objectives. With STOs, no such inconveniences arise since the tokens are categorized as securities from the word go.
Provision of a Recovery Feature
Every cryptocurrency investors is aware of the challenge of losing access to the digital assets wallet. STOs are structured in such a way that investors who lose access to their wallet for one reason or another can be issues with new tokens. A verification process is done to confirm that the users have lost the wallet to hackers before the tokens are reimbursed.
Best Security Token Blockchain Projects to Lookout For in 2019 and Beyond
- Open Finance Network
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