How does an STO work?
* Preparation: The company decides to tokenize an asset and raise capital. It needs to define the structure of the security token, the underlying asset, and the terms of the offering.
* Regulatory Compliance: This is a crucial step. The company must strictly adhere to the securities laws of the jurisdiction where the STO will take place. This often involves hiring legal and financial advisors.
* Blockchain Technology: Security tokens are issued on a blockchain (which can be public or private), ensuring transparency, immutability, and security in transactions. Smart contracts are used to automate compliance and the terms of the token (such as dividend distribution).
* Offering and Fundraising: Tokens are offered to investors, who in return provide capital. In many jurisdictions, there are restrictions on who can participate in STOs, such as the requirement to be an "accredited investor."
* Listing (Optional): After the offering, tokens can be
listed on security token trading platforms, increasing their liquidity.
