Security tokens as a form of corporate financing


The tokenisation of rights in capital procurement heralds a new era in securities issues.

At the beginning of the year, when you read that the Federal Financial Supervisory Authority (BaFin) has approved the first securities prospectus for the issue of so-called security tokens (STOs), you were perhaps reminded – maybe with mixed feelings – of blockchains, cryptocurrencies and the so-called initial coin offerings (ICOs). During 2018, companies all over the world have pulled in billions during ICOs. ICOs have since gained a bad reputation due to several cases of fraud. Nonetheless, the comparison of ICOs with STOs is unjustified. With ICOs, issuers create their own cryptocurrencies and sell them to interested investors. In the process, these investors are buying the mere hope that these cryptocurrencies will one day increase in value – nothing more than that. By contrast, with security token offerings (STOs) as presently being discussed, investors acquire a right and not just a purely speculative object.

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