With the rise of Bitcoin in 2009 and the hype of blockchain as the underlying technology around it since 2013, it has changed the fundraising scenario of the world forever. In the digital currency market, there is now a term that is heard more frequently: security token offering (STO). STO is becoming a powerful and valuable alternative to private equity and venture capital financing for global companies and investors.

What is STO?
Security Tokens Offering, also known as STO, is similar to ICO in some sense but a much-regulated environment where the fundraisers cannot just disappear to obscurity.
In simples way, STO is the way of tokenizing securities and issuing them as cryptographic tokens over a blockchain to achieve several benefits that aren’t present in traditional securities. Security tokens are just like stocks, bonds, LP shares, funds, etc. but wrapped in a digital tokenized form. Any of the companies or organizations dealing with these traditional securities can issue blockchain. These security tokens which are offered are just as eligible as traditional securities to pay dividends, share profits, give voting rights, etc. to its holders.

The benefits of STO
Security Tokens Offering bring many opportunities for improvement to traditional financial products by eliminating middlemen (usually some form of banker) in the investment transaction process. The elimination of middlemen will reduce transaction fees, speed up transaction execution, free market exposure, and expand the potential investor base, which can realize automated services and avoid manipulation by financial institutions.

Real-time online market
The 24-hour non-closed trading time throughout the day will apply to all time zones. The blockchain ecosystem is a technology stack. “All day without a break” is a self-explanatory standard for cryptocurrency trading.

Lower transaction fees
Security Tokens Offering can reduce the need for most intermediaries in transactions, thereby reducing fees, and smart contracts will also reduce the dependence of transactions on lawyers in the future.

Increase liquidity and market depth
Startup equity, LP shares, and fine art are all illiquid assets. Security Token Offerings (STOs) have the potential to unlock liquidity. They make small, private non-liquid securities accessible to everyone.

Compliance automation
unlike many legacy stocks, security tokens are programmable. You can command security tokens to do anything — automate corporate governance, proxy voting and dividends.

Asset interoperability
The biggest benefit of tokenization mainly depends on the ability of computer systems and software to exchange and use information. In a word: interoperability.

Larger investor base
When asset owners can provide transactions to anyone connected to the Internet, the potential investor base will increase significantly. Compared to those investors and institutions that are only recognized by the United States, asset owners will be more willing to show investment opportunities to potential investors worldwide. More choices will bring a healthier competitive environment, and will be a long-term net profit for financial markets.

Build a Security Token Exchange with Market-leading Features
Security token exchanges, which fall under the bracket of Alternative Trading System (ATS), are the platforms where buying and selling of security tokens are initiated. As STOs have emerged as a reliable method of fundraising, the demand for security token exchange development is also increasing. If plan to build your own security token exchange, businesses and individuals can reinforce their exchange with the following features:

ERC1400 — STO Technical Standards. The new standard is mainly to combine the interchangeability of Token with security-related business scenarios and design a set of universal interfaces. The new Token proposal focuses on the supervision function, the purpose is to facilitate users to issue securities on the Ethereum network in a legal and compliant manner.

Powerful matching engine — to match buy and sell orders with minimum latency.

Secure crypto wallet — to provide exchange users with a secure infrastructure to send, receive and store their security tokens. Fortifying the wallet with multi-sig feature can enhance the security paradigm manifold.

KYC and AML Verification –geography-based KYC helps verify user identity while following the right protocol. This allows secure access to the security token exchange by only legitimate and authenticated users.

Multi-currency Transactions –to enable a seamless integration of multiple cryptocurrencies and fiat currencies into the exchange as per your business needs.

Payment Gateway Integration — to allow exchange users to buy and sell security tokens using fiat currencies via a credit card, debit card, and other payment systems.

Multi-language support — to expand the reach of your security token exchange globally.

In sum, there is no doubt that the STO financing channel provides a convincing alternative for private equity and venture capital. Although STO is still improving, this strategy is very important to your business. ByteBulls, as a White Label Crypto Exchange solution provider, will take care of all these aspects like security, performance, user experience, and the SEC compliance that need to be handled during security token exchange development and toil relentlessly to deliver a product that helps you accomplish your business goals.

Schedule a free demo of ByteBulls security token exchange or connect with us to share your needs for a custom exchange： https://t.me/kate8806