The heyday of ICOs in 2017, which is now often compared to the “dot-com boom”, was followed by a rapid decline in investor interest in this form of fundraising. This is due to the high risks of ICO, because in most countries of the world there is no legal regulation in this area. Investors’ interests are not protected in any way, the legal status of digital assets is not legally defined, and the attitude of regulators remains skeptical. Therefore, ICO as a way to attract investment is increasingly inferior to STO (security token offering).
Security token offering: approaches and risks
In the case of STO, the status of digital assets is determined more precisely, since the tokens being placed are similar in characteristics to securities that have a fairly extensive legal regulation.
Nevertheless, STO is still perceived with a degree of caution today, since no country in the world has a systemic legislative regulation of the placement of security tokens, which would be based on long-term law enforcement practice. But despite the distrust of regulators and market participants in cryptoassets, in some countries they are trying to solve this problem at the state level. After all, national legislation can be brought into line with modern technologies in order to attract new investments into the economy.