Token offerings in the crypto world come in different types. In this guide, we will look at security token offerings. Keep reading to find out what an STO is.
What is an STO?
A security token offering (STO) is the process of selling security tokens to raise money for a project in a regulated manner. An STO is a suitable alternative for companies that want to steer away from the unregulated nature of initial coin offerings (ICOs) and the long and tedious initial public offerings (IPOs).
To understand STOs, you need to understand security tokens as well. A security token represents a tradable financial asset. For instance, a security token can represent shares of a company or property.
On the other hand, you can view a security token as an investment contract that represents the ownership of a digital or physical asset. Companies running security token offerings must verify this ownership on the blockchain.
STOs and Regulations
In the US, regulators use the Howey Test to determine if a token offering is a security or not. Here are the identifying factors of a security sale:
· Expectation of profit
· Investment of money
· An investment that was done in a common enterprise
When a token sale passes the Howey Test, it is considered a security token offering. The regulations below govern STOs in the US.
· Regulation D: this regulation exempts companies from registering with the SEC. Companies can raise an unlimited amount of funds, but only from accredited investors. Additionally, companies should fill “Form D” after selling the security tokens.
· Regulation crowdfunding: this regulation allows both accredited and unaccredited investors to take part in the STO. However, companies cannot exceed $1,070,000 in funds raised annually. Regulation crowdfunding prevents pump and dump schemes because investors have to wait a year before selling their securities.
· Regulation A+: the SEC has to qualify companies running an STO under this category. Once approved, anyone can participate in this STO. The limit for funds raised is $50,000,000, but there is no time limit.
· Regulation S: if you are not offering a security token offering in the US, then you will need to follow this regulation. The requirement is that you follow the security regulations of the country where the STO will take place.
The Difference between an ICO and an STO
While some crypto projects have carried out successful ICOs, this type of token offering has attracted a lot of scammers.
In the past, ICOs received such a bad reputation that social media platforms like Facebook banned ICO advertising. As a result, STOs are becoming more popular as investors look for low-risk investment options, and as companies look for better ways to raise funds.
Below are the differences between ICOs and STOs.
Besides attracting scammers, ICOs also allow unfair trade practices like front running, washed trades, and pump and dump schemes. During front running, individuals purchase a lot of tokens before other people can. Once the price of the token increases, they sell everything they bought.
Washed trades, on the other hand, refer to the practice where investors trade tokens between themselves to create the illusion of liquidity.
During pump and dumps, traders conspire beforehand to purchase a lot of tokens to increase the price. Once the price rises, they sell all their tokens on exchanges.
Tinaga Island Resort Token Sale
By 2019, the crypto industry had recorded 64 successful STOs, which raised about $1 billion. That means that STOs are promising and could become more popular in the future. This is one of the reasons why the Tinaga Resorts Corporation decided to plan an STO.
The other reasons include:
· STOs are low-risk to investors
· An STO is best suited for the Tinaga real estate project
· The tokenization of our property will enable more people to participate in the STO
So, what is our STO all about?
Firstly, Tinaga Resorts Corporation owns a property on the number one beach in the Philippines. This is prime land, whose valuation has been increasing over time.
The plan is to build a luxury green eco-resort. Therefore, STO investors will own equity in an oceanfront beach resort when they purchase the Tinaga Island Resort (TIRC) tokens.
Currently, we are in the preparation stage of the fundraising process. We will hold a pre-sale from 16 November 2020 to 28 February 2021, or until we sell TIR tokens worth 2,500ETH.
How Will Investors Benefit?
An investor that holds TIR tokens also owns equity in the property. We shall add the title deed and other important documents to the FLO blockchain technology and link them to the TIR token on the Ravencoin blockchain.
Investors will benefit from the revenue the resort generates once built and the pre-sale of the villas. We expect that the value of the land will appreciate once we develop the land.
Currently, the property value is $8.4 million, and we need $10.6 million to build the resort. After developing the land, we estimate that the asset’s valuation will increase to $110M-$130M. Your ownership is a pro-rata of this valuation.
Our STO is open to investors from all over the world. However, we expect US investors to be accredited. That means that they should have a net worth of $1,000,000, excluding the value of their primary residence. Accredited investors can also have an income of at least $200,000 per year for the last two years and should expect to earn the same amount this year.
We plan to drive the value of the token by revealing all our partners, making the green paper available for everyone to read, and listing the token on reputable exchanges.
Note that we are still in the preparation process, and we release updates weekly. Also, we are open to questions and feedback of any kind.
Are you interested in participating in an STO? We are happy to announce a pre-sale discount of 50%. That means that you can participate in our STO by buying our token for only $0.10 cents!As a result, early buyers will be better placed to buy as many tokens as possible.
So, do not waste time. Our pre-sale begins on 16 November 2020. Click here to register now.