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Introduction to Digital Asset Securities

In a token offering (often referred to as STOs, DSOs or IEOs), a private company is able to raise capital through the sale of blockchain tokens.

The tokens (often also called digital asset securities or tokenized securities) can represent an economic interest in a company, such as shares of capital stock or membership units in an LLC; fund interests; profit sharing interests; fine art; real estate; precious metals; diamonds; and the list goes on.

Why Token Offerings offer a Strategic Pathway to Raising Capital

Token offerings, which are predominantly treated as offerings of securities under US law, present a number of benefits to traditional capital raising models.

Cost-effective and Far-sighted

Compared to a traditional IPO, an token offering can capture substantial savings. Blockchain technology allows issuers to remove costly layers of intermediaries such as banks, custodians, and broker-dealers. After any required lock-up period, the company may access a direct and affordable path to the secondary markets. Secondly, administration and regulatory compliance costs are mitigated on the long-term as a great portion of the oversight and handling of governance matters, investor management and tax reporting can be reliably and inexpensively automated and are not subject to SEC oversight.

Fast and Far-reaching

The onramp from decision to launch for a token offering is largely dictated by the securities exemption relied upon. Furthermore, token sales may be conducted on an international basis, subject to compliance with international jurisdictional requirements, which may advance the general timeline of the company’s successful capital raising endeavors.    

Liquid and Convenient

Digital security tokens are listed and traded on specialized secondary markets. Some of them are offer the ability to trade 24/7, which increases market liquidity. The traditionally low transactional fees and opportunities for fractional ownership of securities can attract smaller investors to a fundraise. These features are important because they help spread awareness of the company raising capital, develop its ecosystem, and potentially convert its investors to brand ambassadors of an international scale as the subject tokens trade on the secondary market.

Programmable and Transparent

Security tokens can be programmed, automated, and enforced through smart contracts, a technology that offers many applications and can, for example, facilitate compliance oversight by following both Know Your Customer (KYC) and Anti-Money Laundering (AML) laws. Once compliant security tokens are issued, a great number of programmable solutions are available, as smart contracts can allow more efficient and transparent governance and voting processes while dramatically reducing the time spent on investor communication, holding periods issues, and other questions related to transfer restrictions and distributions.

Undisputable and Trustworthy

With the right software for record keeping, audit, and reporting, a number of operations that are ancillary to capital raises and that are traditionally subject to human error can be automated with certainty on the blockchain. Fully taking advantage of an STO means using the reliable ledgers relating to company ownership in connection with compliance management and tax reporting, thereby avoiding the burden of manual reconciliation of the relevant information. With automated ownership and transaction records, the risks of clerical errors are substantially mitigated. The burden of manually cancelling or issuing lost certificates is lifted, reliable investor ledgers maintained, and potential conflicts are avoided.

Navigation Guide

  • Why Token Offerings offer a Strategic Pathway to Raising Capital
  • Cost-effective and Far-sighted
  • Fast and Far-reaching
  • Liquid and Convenient
  • Programmable and Transparent
  • Undisputable and Trustworthy

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