Recently, in the chain circle, the hottest word is STO. Its mention rate is very high, and all related theme activities are packed, so what is STO? Do you really understand?

STO, the full name of securities token issuance, is the issuance of securities-based certificates. Under the constraint of securities law and financial supervision, the act of financing by issuing securitized securities.

2065438+On July 25th, 2007, SEC, the US Securities Commission, issued an investigation report on the incident of "failure to issue the Dow project", which clearly pointed out that Dow is a securities asset and is supervised by them. Issuers must abide by the provisions of the US Federal Securities Law and register their trading behavior with the government. At the same time, investors' announcement was issued: initial token issuance means that according to the actual situation of each ICO, the digital currency or tokens issued or sold may be securities, which are governed by the federal securities law. This is the first time that the SEC defines ICO projects as securities, and it is also an identification of Security Token.

STO classification

Token is a certificate of rights in the blockchain world. Generally, it can be divided into security tokens and utility tokens, that is, securities-based passes and utility passes.

According to the financial model, security tokens are divided into four categories:

A debt token: a general certificate representing debt or cash income rights.

B equity token: a token representing partial ownership of the underlying asset.

C mixed/convertible tokens: combining the characteristics of stocks and debts, such as convertible bonds and convertible preferred stocks.

D. Derivative tokens of funds and derivatives: ST price is based on the current price of the underlying asset pool. Derivatives can be divided into forward options, futures and swap instruments, and funds can be ETFs.

According to the classification of assets, security tokens are divided into three layers:

A. Senior: give priority to the fixed low-risk income;

B, mezzanine: the second floor enjoys fixed risk-free income plus floating premium;

C. Equity: the inferior layer enjoys the residual income, but if the asset side defaults, the inferior layer will be used for redemption first.

Advantages of security tokens

1) ST complying with federal regulations is cheaper than operating an IPO.

2) The bridge between the traditional financial sector and the blockchain

3) The legal risk is low.

4) The threshold for entering the financial market is low.

5) It is possible to bring better benefits.

So how to distinguish a security token, that is, how to distinguish whether it is a security token?

Generally speaking, the commonly used method is Howell test. It is divided into four dimensions: 1, whether there is capital investment, whether there is investment in common undertakings, whether there is profit expectation, and whether profit depends on the efforts and management of others. After appraisal by professional lawyers, the more affirmative answers, the greater the possibility of securities, which will be bound by the securities law.

Block24Center is a blockchain accelerator established on 20 17, focusing on Southeast Asia. At present, we have set up offices and operation teams in Thailand, Singapore and China to provide customers with localized project incubation and acceleration services. Provide compliance services for blockchain enterprises.