Security tokens are the future of investment in Web 3.0. This sphere has developed rapidly; it can be called one of the main trends of the early 2020s. This technology is at the intersection of traditional investments and blockchain and has enormous prospects. However, many beginners have little idea of how to invest in security tokens. It is essential that you have the necessary knowledge for such an investment. So, in this article, we will explain how to invest in global token technology.
Security token offerings are replacing ICOs
Today, the primary way to invest in global security tokens is the Security Token Offering, or STO for short. In traditional markets, the initial issue of shares is called an IPO. In the world of cryptocurrencies, there is an alternative – ICO, initial coin offering. It is used to offer cryptocurrencies or utility tokens to investors. However, digital assets issued as part of an ICO do not allow for the acquisition of ownership. In particular, a utility token entitles only certain services or preferences on the platform that performed the issuance.
One of the main problems with ICOs is the high risk of fraud. Many financial regulators warn about this, and such situations arise quite often. Thus, the STO has replaced the ICO as a more regulated and legal process.
In fact, the STO is at the intersection of ICO and IPO. This process includes all the best from all types of emissions. The similarity to an IPO is in reliability since the STO is subject to clear rules and operates on the basis of securities laws. STO received blockchain's transparency and security from the ICO since all records are stored in a distributed ledger and cannot be deleted or replaced.
STO has an important advantage over other methods of raising funds – official regulators recognize security tokens as securities. Leading regulators of the world, such as SEC, FCA (UK), and FINMA (Switzerland), have issued guidelines that provide clarity regarding security tokens. Therefore, in the markets of these countries, STOs have become extremely popular among token investors.
How to invest in security tokens?
Both institutional and private investors can invest in security tokens. People who want to add such tokens to their portfolio must know some rules and specifics. In order to start your journey in such investments, it is crucial to follow the following steps:
- Learn in detail what the STO is and how it works. Make sure you understand how to invest in security tokens and that you are ready to make such an investment.
- Select the STO you want to participate in.
- Gather information. It is extremely important to conduct research on a particular token and the company that is issuing it. Familiarizing yourself with the technical documentation, legal regulations in your country, and other nuances is necessary.
- Study the market. Look at what happened to other security tokens from this niche. Make sure they are effective enough. This will allow you to understand and predict what may happen next.
- Buy tokens. Investments in STO are made through special platforms.
- Monitor and evaluate the effectiveness of investments. It is imperative to track the dynamics of price growth, dividends, etc., in order to understand whether your investments are really working.
What to consider when investing
Before investing in security tokens, it is important to choose the right niche. Take the time to analyze the offer carefully. Before investing in STO, consider the following:
- Business aspect. In this case, a technical document is important because it provides detailed information about the platform that issues security tokens.
- Legal aspect. You need to familiarize yourself with the legal nuances in your jurisdiction. It is extremely important to comply with all legislative rules in order not to face claims from regulatory authorities.
- Customer service. Make sure the platform provides reliable communication. Questions may arise during the STO, and you may need to contact technical support anytime. Make sure that the support offers all the necessary communication methods.
- Marketing aspect. Evaluate how this company is going to increase brand awareness; what is its marketing strategy.
The secondary market for security tokens
The secondary market for security tokens makes such digital assets even more liquid. Thanks to solutions such as DS Swap by Stobox, token investors holding security tokens will be able to sell their assets if necessary to other interested parties. Also, it is another way to buy security tokens for digital asset investors, in addition to participating in the STO. With the advent of the secondary market, security tokens have become even more reliable and flexible investment instruments as they can be easily traded, bought, or sold without intermediaries and within state regulations.
The future of STO
In 2021, there was a significant trend towards non-fungible tokens (NFTs). Millions of content producers, as well as all kinds of world cinema, sports, and pop stars, have shown interest in this technology. This trend clearly demonstrated that the popularity of digital assets is only growing.
Traditional cryptocurrencies may still be a good asset to invest in, but there are a number of regulatory issues here. Many states take harsh measures against them. For example, in China, cryptocurrency trading and mining are completely prohibited. In addition, cryptocurrencies are very volatile, which creates additional difficulties in investments. In the US, the Biden administration and the SEC have also taken some restrictive measures against cryptocurrencies.
In this situation, the STO looks like a winner. Regulators willingly interact with the market of digital assets equated to traditional securities. Security tokens combine the best features of traditional physical assets and digital assets. They are especially suitable for traders who intend to invest in new instruments but have more conservative strategies that require stability.
Companies that wish to raise capital will also increasingly focus on STOs. The market for these assets is expected to reach $167 trillion by 2030. Thus, security tokens have impressive prospects. Whether you want to issue your own security tokens to attract digital asset investors or you are considering other types of digital assets, we will be happy to help you. Contact us for a free consultation.