Maybe you've heard of security tokens a lot recently or their more famous form of STOs (Security Token Offerings), which many people say are going to replace ICOs, that we know well.
The reason for this is because all the new regulations and laws coming out surrounding this topic.
You may have heard of Utility tokens before but how did they compare to Security tokens?
Well most projects in the past have tried to sell Utility tokens and what they are, is that they give future access to platform or dApps. In this case the purpose of this token is for usage, not for investment purposes.
Security tokens on the other hand are kind of a form of investment contract and they represent equity in a company, profit sharing and even voting rights. Now these are governed by security laws, so they're a lot more strict in order to offer these Security tokens, that's why many companies try to go for Utility tokens.
There are three main types of Security Tokens.
They offered many of the things listed earlier with an expectation of price appreciation if you buy them and most of these exclude investors from the United States, China and some other countries that are more tight on these rules.
They are definitely not available for listing on major exchanges especially ones that are centralized and based in the US.
The SEC famous DAO report, said that ICOs or coins need to pass the Howey Test in order to be considered securities or not.
These comply with regulations and issue official security tokens and they're embracing the security status instead of trying to skirt it like the initial ICOs did.
Some countries already have a full fledged framework for these STOs, so you can offer them there. They are not available in the US but they are available to a wide range of international investors.
There's more legal and complaint access to crowd funding for investors. It's less risk for you because the loss force these companies to have transparency, offer equity ownership and so forth.
These Security Tokens may also be backed by real world assets, which makes it easier to assess the true value of them.
