Now there’s another term to Raise Funds with Digital Currency: The ‘STO’

Chirayu Choubisa

April 28, 2018 11:14 am

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There’s a New Term for Fundraising with Cryptocurrency: “Security Token Offerings” (STO)

By now, even the non-bitcoin supporters may have known about a process called initial coin offerings (ICO). The Securities and Exchange has cracked down with charges of frauds and scores of subpoenas this year.

But CEO of overstock, which is under SEC probe, told there’s a secure way to raise money through crypto: Security Token Offerings (STO).

Overstock CEO Patrick Byrne stated, “It’s the new term. The industry is distinguishing very clearly now between ICOs and STOs.”

This week, overstock declared a $2.5 million investment in a three-wheeler startup Elio Motors. The automaker also reported the launch of “ElioCoin” to raise funds for production and clarified in an announcement it was a “security token offering.” The process is being driven by Wall Street trading company  Jones Trading Institutional Services.

Patrick Byrne stated, “It is a very clever offering, and could represent a whole new model for American entrepreneurship.”

In an ICO, tokens or coins are put up for purchase as a kind of crowdfunding. Rather than voting rights or dividends that come with shares of a company, “utility token” guarantee access to a network, service or platform. But they’re usually upheld by an abstract idea or nothing at all.

As per one expert, in a Security Token Offering (STO), you can purchase tokens or coins. But unlike in several ICOs, these token must be supported by something tangible, such as assets, gains or revenue of the company. They act precisely like a share of the company, however, are “programmable,” to do things like conduct proxy voting, since they are based on blockchain technology.

A platform that assists people in launching security token.

Trevor Koverko, CEO of Polymath, stated:

“You can program a token, but a static share certificate just sits there and collects dust.”

Mr. Jay Clayton Chairman of Securities and Exchange Commission made it clear in March that all ICOs constitute securities. By adopting the term “security token offering,” issuers are being more upfront with regulators that what they’re trading is indeed securities, said Overstock’s, Patrick Byrne.

The CEO stated:

“The ICO craze of last year formed a toxic waste dump of financial assets. To me, that world of ICOs is a Superfund site.”

Patrick Byrne stated, “What we’re developing is a mechanism so that there will be a legal way to go forward and not produce any new toxic waste.”

He described what some ICOs were doing “flagrantly illegal.”

Patrick Byrne included, He thinks the SEC should permanently shut down the utility token world. Eventually, the security offerings will just be done instead of the IPO in lieu of shares.

Overstock is too under probe. The Chief would not remark on the charges and made it clear that he was cooperating.

In an 8-K filing, Overstock stated that in February the SEC asked “certain documents related to the Offering and the Tokens in connection with its investigation.” The company declared its ICO launch in October and told at the time the offering would be legally compliant with SEC rules.

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