Security Tokens are digital securities which are regulated by the SEC. Unlike traditional Securities, Security Tokens are held in Investor's private Wallets. That means that those Securities are in full control of the Investor and not are held by intermediaries such as banks etc.
100% of the stocks and bonds trading on Wall Street today COULD be tokenized, and in five years, 100% of the stocks and bonds on Wall Street WILL be tokenized
Robert Greifeld (Former Chairman & CEO of @Nasdaq)
A security token represents traditional, private or public security interest. It could represent a share in a company, an LP interest in a fund or a trust, a real estate property or a member share in an LLC.
On March 7, 2018, the U.S. Securities and Exchange Commision (SEC) published a new report regarding the state of cryptocurrency assets and the potential risks for investors. The report states that some ICOs, digital assets, and cryptocurrencies must be classified as “securities”, and the term security token was born to reperesnt a legal form of an asset backed security represented by a token.
The SEC is concerned that different parties could conduct illicit or fraudulent trading through cryptocurrencies that are not asset backed and therefore do not provide any guarantee to investors. We highly encourage not to invest in cryptocurrencies and to invest only in SEC regulated Security Tokens.
Issuance of new Security Tokens or Security Token Offerings (STO) are legal and compliant if they are issued according to SEC regulations. Issuing a new Security Token requires great knowledge and it is highly recommended to work with a proficient issuance partner. Offers are required to register with the SEC or exempted.
A Security Token or tokenized security is where an asset has its ownership structure managed by a blockchain, including units of ownership represented as digital shares/tokens (instead of paper share certificates). In Security Tokens, the investors holds their "securities" of Security Tokens in their encrypted wallets.
Security tokens enables a new generation capital formation and fundraising, and will be used to tokenize the trillions of dollars of global assets (real estate, debt, equity and many other asset classes). Security Tokens can help companies, in all sizes, to raise capital by new Security Token Offerings (STOs), and improve liquidity of existing assets such as real estate, equity and debt.