ICOs are out- STOs, the new funding model up next for crypto, are in

26 Nov, 2018 | Updated: 27 Nov, 2018
by Arthur Sillers
ICOs
ICOs are out- STOs, the new funding model up next for crypto, are in

ICOs are going by the wayside, and in exchange are STOs, or Security Token Offerings, which are, as the name suggests, based on securities rather than utility tokens.

According to the South China Morning Post, ICOs have become something of a dirty word, and for good reason. The ICO market is absolutely lousy with scams, and a Fabric Ventures report indicates that over half of all ICOs either disappear, fail to raise any capital, or end up refunding investors. Even ICOs which apparently earnestly strive to create a profit following successful funding all too often fail to even create anything with substantive value or profit potential, even with millions of dollars in startup capital.

Accordingly, sentiment around ICOs is not good right now, and many are looking to the STO, or Security Token Offering investment model to phase them out, and thereby hope to re-legitimize crowdfunding investment schemes. The salient differences between an STO and an ICO are that an STO requires KYC and anti-money laundering measures inherently, and it represents a share, not a utility token which purportedly will have value in the future. STOs transparently represent something which already has tangible value, so investors can feel more confident that they aren’t putting their money into empty promises.

Crypto enthusiasts naturally are getting excited about the concept, as are those in traditional finance. According to Crypto Briefing, some financial insiders, formerly of JP Morgan Chase, have confirmed that STOs are being looked at as a very real funding model, and indicated that steps are being taken to bring them to market.

Furthermore, STOs are much friendlier to regulators, which is important when the SEC in the US as well as similar global regulators increasingly cracking down on the mostly unregulated ICO market. These entities will be much more comfortable with a security offering, even a crypto powered one, rather than an ICO, which has a well earned reputation for instability or malfeasance.

As crypto increasingly becomes mainstream, start ups will continue to need funding to even enter the space. As the ICO becomes an increasingly dirty word, STO will likely come to take its place.

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