Why Do Startups Prefer STO Development over the Traditional IPO?

STO Development

Many years ago, crowdfunding was introduced to initiate a new business. The required amount of funds can be raised from the investors, then a startup or an entrepreneur can quickly kick start their business. It only uses fiat currencies and involves many legal authorities and risks. To avoid all those circumstances, crypto crowdfunding was introduced.

With the inception of blockchain technology, cryptocurrency got popular to its extent. Many new methods of crypto crowdfunding were also introduced and it was widely accepted by various people across the globe. Crypto crowdfunding offers various perks when compared to the traditional means of crowdfunding like third-party emission ( commission fee is avoided), no limits for collecting funds, etc. 

IPO (Initial public offering) is the traditional fundraising mechanism followed before the emergence of crypto crowdfunding techniques. While speaking of the crypto crowdfunding methods, they include initial coin offering, initial exchange offering, security token offering, initial dex offering, initial token offering, initial farm offering, etc. Among all these methods, STO development is more popular because of the security features it offers. 

In this article, we shall discuss IPO and STO, the differences of STO vs IPO, the wider preferences for STO over IPO, choosing STO development company, etc.

Come, let us begin with…

What is an IPO?

IPO refers to the initial public offering which is a traditional method followed by companies to raise funds for their business. At first, the fundraising company will sell its shares to its potential investors. The fundraising company should meet all the requirements and regulations of the exchange. Funds will be shared when the investors buy their shares in the marketplace. The IPO fundraising process involves banks saving their funds in it. Not only that, raising funds through IPO is a long process as it includes many formalities and numerous paperwork. 

Then moving to.

What is an STO?

STO ( security token offering) is a popular crypto crowdfunding method that is followed by many crypto startups for raising funds. STO platform can be launched by creating security tokens. Security token creation includes the pegging of assets. Depending on the type of assets backed, the security tokens are divided into debt tokens, equity tokens, and asset tokens. You can create any of these types depending on the assets that are going to be backed. Additionally, getting approval from the SEC is highly mandatory for launching an STO. 

Security token offering development includes central authorities’ involvement because of getting SEC approval. In simpler words, STO is a modern version of ICO followed along with regulations. This is what a security token offering is. 

Now, we shall see what makes STOs secure.

How are STOs Regulated?

STO development is completely regulated based on the jurisdictions of the governing body. The rules and regulations might change as per the local government’s policies. The United States Security and Exchange Commission (SEC) approves an STO project by passing Howey’s test. 

Howey’s test includes various conditions. They are as follows.

  • Fiat money or crypto tokens can be accepted by the investors.
  • The money should be invested only in a common venture.
  • The startup can raise funds with the expectation of profits. 
  • Profits should be derived by factoring in the efforts of more than the initial project members.

Security tokens will be issued by the SEC only if all the conditions mentioned above of Howey’s test are fulfilled. STO Development can be executed only if Howey’s test is completed successfully. So, be careful while passing the Howey test.

This is how the STO projects are evaluated and regulated by the SEC.

Now, let us look at an overview of STO and IPO.

Differences Between STO vs IPO

STO Development

Difference between STO vs IPO

In comparing STO vs IPO, STO has more advantages than IPO. Many new startups and entrepreneurs prefer to launch an STO by considering the security factor. When choosing the crowdfunding method, just think of the benefits and the profits you can reap. Considering these factors, STO will be the ideal choice. 

Let us take a look at the benefits of STOs.

Benefits of STO Development

There are numerous perks of developing an STO platform. 

  • Fractional ownership (i.e) As discussed earlier, security tokens are created by pegging certain assets. Ownership will also be fractioned accordingly as per the value of the token itself. So, anyone can launch an STO platform in a hassle-free manner.
  • STO development offers higher liquidity for the developers as well as investors.
  • Developing and investing in a security token offering is highly risk-free due to the involvement of the SEC. 
  • Security token offering development offers global market accessibility. People from all over the world can create security tokens and launch an STO.
  • Security tokens have higher market efficiency in the crypto ecosystem. So, it is highly beneficial for reaping profits.
  • There will be no fear of loss of funds because of the involvement of the SEC. There is very less possibility of scam offers and it is highly safe and secured.

These are the major benefits of security token offering development. Launching a fully furnished STO platform will yield huge returns for your crypto business.

Numerous security token offering development service providers are prevailing in the crypto ecosystem. Choosing an experienced STO development company is the crucial factor that has to be considered here. 

Why Choose Icoclone for STO Development?

Developing your STO platform from a first-class STO development service provider will help you in the long run. One such reputed STO development company is Icoclone. Icoclone is one of the esteemed security token offering development companies in the crypto space. We have a team of well-seasoned and highly efficient developers for developing an STO. Our team collects the clients’ requirements and develops the STO platform accordingly. Because of delivering full-furnished products, we have many reputed clients across the globe. We also offer 24/7 customer support in case of any issues. Icoclone also excels in offering ICO scripts, STO scripts, crypto token development, etc. So, get in contact with Icoclone for your STO platform development promptly!

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