Blockchain is a revolutionary decentralized model that resonates with almost every industry globally and rapidly evolves. One of the breakthroughs is coins generated by ICOs, called tokens. However, this cryptocurrency market decided not to stand still and created different types, including security tokens. Their advantage is intangible value, that is, a real asset.
In other words, a security token is the financial security of ownership stored on the blockchain and tested by the best blockchain audit companies. In many financial markets, security tokens are referred to as digital assets because they are a more traditional type. So, stocks, assets (real estate, gold, etc.), bonds, derivatives, and other trading securities can be tokenized and placed on blockchain technology.
However, they must also meet specific criteria by the Howey test:
- Real estate, stocks, bonds, and other products must have investors.
- To raise capital from your investment.
- The possibility of trading investment.
- Money profits should not depend on investors but the initiator or a group of third parties.
So, let’s find out which security tokens are better to invest in and where to buy them.
Why Is Security Token So Popular?
Everything in the cryptocurrency world has pros and cons, and a security token is no exception. It is still a developing industry, and legal regulation does not always keep pace with such rapid changes. But there are more benefits:
- It is a more efficient way to trade securities, blurring the lines in the crypto market. Or you may try the traditional stock market.
- Laws and regulations provide consumer protection, and exchanges legitimize the market cap.
- The driving force behind liquidity. Blockchain projects are leading to more democratic participation in traditional markets.
- Partial ownership opens up new avenues for companies’ investment.
- Stolen money can be returned due to increased traceability.
What Are the Best Security Tokens?
The security token market cap is expanding all the time. Based on dozens of reviews from experienced token holders, below are the top 8 security tokens that have the most potential for unlocking liquidity and future growth.
One of the initial public offerings belonged to this security token and is considered the beginning of the revolution in the cryptocurrency space. It is usually represented in the vector fund. It was founded in 2013 but was launched only after four years. And in the first six hours after the launch, it raised about 10 million dollars.
Since June 2019, a token has finally gained in the market and is supported by Coinbase. As a result, everyone who wants to raise their blockchain capital can buy it on the OpenFinance platform.
It is well-known among tokens and available on the Algorand blockchain. Moreover, it is traded in the Securitize crypto space, and its transactions are close to $48 million. Usually, token investors get ownership of Class A Shares from Exodus.
These trading security tokens focus on cryptocurrencies and other digital assets. Their investments are aimed at institutional investors. At the same time, they are the most valuable security tokens, with transactions over $240 million. Moreover, they provide positive trading with an annual 40% dividend on the INX platform.
It is the earliest token in the blockchain space. It was launched to raise billions of dollars to solve the most pressing global needs by using global charitable raffles. It offers token holders a 7% revenue share on all sales.
These securities were launched together with tZERO blockchain tokens, and they have a market cap of over $170 million. And they were awarded at a ratio of 1 per 10 shares owned as a dividend distribution.
This token is managed by the most experienced teams responsible for participating in digital securities. One of the most significant investments is Securitize. It shows the intrinsic value directly provided by SAGA, ROX, and Bakkt companies. In addition, such tokenized assets allow you to acquire full or partial ownership between investors. You can also buy this token on the OpenFinance platform.
These security tokens are working hard on the creation of digital securities. They develop this platform due to its reflections being fully legally compliant. Entirely controlled investors and banks can use them as a test version to ensure complete compliance and legality. They can be purchased directly on the tZero platform.
Foundation 22X invests in 30 previous launches, which are part of the other 500. All investors of these companies improved their previous funds and income. In most cases, institutional investors focus on Fintech, data, and digital health companies and usually get 2.5% to 10% equity. You can find this security token offering on the OpenFinance platform.
Legal Aspect of Security Token Offerings
Blockchain-based tokens are always in action. They have many new platforms, which help with the main legal aspects of issuing STOs. In addition, every state has its own body for regulation.
In the USA, they fall under the remit of the SEC, which has a federal meaning. But in Canada, any smart contracts with them are under the provinces’ laws.
Do Security Token Exchanges Have Any Risks?
Anyone can anonymously launch an ICO even without real future product developments. And depositors are not protected from risk in any way. Therefore, it is subject to existing laws that control the issuance and circulation of securities and any exchange commission. So, it ensures the protection of the investors’ rights and minimizes risks.
Security tokens are the same securities but in numbers, bringing good profits to investors. Their appearance on the horizon proved the need for their release and improvement in the future. It is a huge step towards establishing clear and understandable rules for the blockchain industry and its systematization.
There are some answers to the questions that help to clarify the most important issues.
It is a special portable device that stores some part of users’ personal data. It is plunged into the system by the owner. And it helps to grant access to the network services.
The process consists of five important steps. You need to decide about the providing right of a token, choose jurisdiction, and issuance platform. Then you actually create it and the offering.
Choose the exchange of your country. For example, It is tZero or OpenFinance in the USA, Blocktrade in Europe, and Cointronix in Asia.
Both are interconnected since some equity tokens are among the classes of security tokens. For example, they may give the owners private equity or share ownership in the underlying companies. However, it is not necessary for security tokens.
There are some doubts about the legality of utility tokens in the burgeoning industry of blockchain. The main problem is that it is not an investment product, and it simply provides access to the platform, like a coupon for a discount. Securities don’t have such a problem, and local law regulates their sales.