Starting with Bitcoin in 2009, the development of cryptocurrencies Cryptocurrencies are becoming more and more prevalent, not only now that there are thousands of crypto coins available for purchase on exchanges. Now investors and traders can also buy tokens (a different crypto asset from coins. see the difference in Coin vs Token Articles according to usage
But regardless of any coin or token, these digital assets generally come out with a gimmick. Initial coin offering (ICO). same as Initial public offering (IPO) In capital markets, ICOs also aim to raise funds from crypto investors to create crypto projects offered by companies.
This mechanism is mainly operated by crypto token and coin development companies, except for security token. In this type of token The mechanism used is security token offering What is STO and how is this mechanism different from ICO? Check out the following discussion.
Definition of STO (Security Token Offering)
STO or security token offering It is an introductory offering mechanism for security tokens. Unlike other tokens, security tokens are generally utility-based. Security tokens are digital assets that are valued based on real-world financial assets such as stocks or bonds.
According to some sources The owner of this token can exchange assets for ownership of stocks or bonds in the capital market. not only that Governments and non-crypto developers can also issue security tokens. Thus, this token can be an alternative way of raising additional funds for use in government projects and company operations. Differences in this nature lead security token issuers to require a different IPO mechanism than tokens and coins in general.
The authors say that the concept of a security token is similar to a stablecoin, however, the underlying asset is different. Security tokens are based on securities products in the capital and financial markets, while stablecoins are generally based on currency exchange rates.
STOs typically connect companies or governments looking to get additional new capital outside the regular capital markets with crypto investors looking for safer investment and trading options.
in Indonesia This type of token issuance has not yet been developed, however, in many countries this new digital asset issuing mechanism is legal. in the United States, etc. These securities token rules are regulated by the United States Securities and Exchange Commission (SEC).
Difference Between STO and ICO
Although both are the default crypto digital assets issuance. Due to the different concepts between security tokens and utilities, STO and ICO are two different processes. Here’s the difference:
1. Reference assets
Crypto coins and tokens generally do not have an underlying or underlying asset. except stable coins This means that the change in the price of an asset is caused by a change in the supply and demand of the asset itself.
On the other hand, the price movement of the security token will change with the change in the price of the underlying asset. However, whether the price change is similar to stablecoin or mutual fund, Still need to study more.
Regardless of how crypto companies determine the price of this asset. Security token investors receive benefits that investors in the capital market typically receive, such as dividends or coupons.
Crypto tokens and coins are not issued by any country’s central bank, so issuing new tokens and coins is relatively unregulated. This, of course, is different from capital market products such as stocks or bonds. in indonesia The turnover of these two securities is regulated by OJK and organized by the Indonesian Stock Exchange.
This means that the security token issuer must comply with the relevant asset capital markets regulations. Like it or not, for example, there is a token issuing company that uses BBCA shares, then the issuer and circulation of the token must comply with regulations from OJK and IDX.
One of the challenges that the world of The main selling point of this digital currency is its independence from the regulations of any country’s regulators. This, in turn, protects the privacy of transactions. of investors and many other advantages, but vice versa Many criminals use this digital currency for transactions that violate the law and violate humanity.
The existence of the above underlying and regulatory assets makes security tokens and STOs more secure compared to ICOs, at least if the company goes bankrupt. Investors who own security tokens can trade their assets for instruments in the financial and capital markets. Of course, this doesn’t apply to common utility tokens.
But you have to keep in mind that the security aspect here is still the security in investment fundamentals. The technical security of each token differs depending on the technology used, so make sure you continue to assess the security of your crypto assets, even on the security tokens.
Difference Between STO and IPO
Although they have similar mechanisms, STOs and IPOs are two very different things. Here are some differences between the two:
1. Property Offered
Initial Public Offering (IPO) It is the process of offering shares of a company to the public for the first time. IPOs are generally limited to the capital and financial markets. Unlike STOs, STOs offer stocks, bonds, and other equity market instruments. in tokenization.
In fact, one type of security token is asset reserve token The value of this instrument depends on the change in prices of non-capital markets and financial market assets such as assets or precious metals. in indonesia Precious metals trading is included in the commodity markets category.
2. Mechanisms and regulations
in the Indonesian capital market Companies wishing to IPO must first deal with OJK and IDX to collect documents. After the document has been approved The company will go through the accounting process before being officially listed on the stock exchange. not only that The IPO process also involves many other parties, such as securities companies. public auditor and other teams of experts to help companies in raising funds from a large audience.
On the other hand, everything related to crypto assets in Indonesia is managed by BAPPEBTI, an institution under the auspices of the Ministry of Trade and Industry. Therefore, it is not surprising that STO regulations and mechanisms in Indonesia still need to be reviewed.
Security tokens and STOs offer alternative crypto-currency investment tools for investors who wish to invest safely. and for companies and governments that need additional funding