Companies around the world have almost always relied on traditional methods of fundraising, including venture capital and initial public offerings. The past few years has been rather disruptive in comparison, with initial coin offerings (ICOs) soaring in popularity and posing a significant threat to those tried and tested models. In 2017 alone, the ICO industry raised a whopping $5.6 billion. While both funding approaches have their advantages, they also each have their own shortcomings. As a result, new companies are increasingly considering security token offerings (STOs) for their fundraising endeavors.
Security Token Offerings: The Perfect Balance?
There are several reasons why investors, especially accredited ones, would feel more comfortable investing in a security token than a traditional initial coin offering. For one, companies offering securities have to conform to the legal requirements set forth by local governments. This entails a certain amount of regulatory oversight, which in turn largely eliminates the risk of fraud and scams, two issues currently prevalent among ICOs. In the past, the U.S Securities and Exchange Commission (SEC) has shut down multiple companies for fraudulently raising millions of dollars through unregistered token offerings.
In comparison, security token offerings offer investors an unparalleled peace of mind. A security token offering (STO) offers investors some legal recourse in the event that a company fails to take off. Generally, an investor has certain legal rights when placing his money (and faith) in a company. While this is relatively unheard of in the cryptocurrency and ICO space, it is pretty much a given in stocks and equity.
Additionally, many believe that proper STO implementations can go a long way to legitimize the cryptocurrency ecosystem in the minds of the public. This can already be seen to some extent in the case of past noteworthy STOs that have raised several millions of dollars to build regulatory compliant projects. tZero, for instance, aimed to raise $250 million in its STO to build a security token exchange.
Navigating the STO Maze
At this point, it is rather clear that STOs are superior in almost every aspect and may very well be the future of crypto fundraising. However, a crucial limiting factor for most companies considering security tokens is the sheer amount of resources required to achieve regulatory compliance. Given that the classification of crypto tokens as securities is still somewhat uncharted territory, most companies can be easily overwhelmed by things such as investor relations, dividend distribution and establishing a solid legal foundation.
In light of these requirements, Singapore-based fintech firm AnyPay is supporting businesses looking to host their own security token offering. The company’s platform will offer a STO consultancy service, which will take care of all required legal obligations and documentation.
Given that securities come with an increased legal responsibility on the part of companies, AnyPay will also assist them navigate KYC/AML laws and accreditation verification. Finally, the service will help with developing smart contract systems for token distribution at the end of token sale events.
Additionally, the platform will provide companies with tools to manage communication and dividend distribution once the STO has been completed. In short, AnyPay will essentially provide an end to end solution for virtually every single type of security token offering.
AnyPay will initially be expanding its range of services in the Indian and Southeast Asian markets, with the rest of the world to follow. So far, AnyPay has been instrumental in the launch of a few major STOs, including the Indian car rental platform Drivezy. The company launched its RentalCoins security token last December and successfully raised around $18 million in 3 funding rounds. Prior to that, AnyPay advised the cryptocurrency wallet company Bread in the launch of its ICO. The token sale managed to raise over $32 million.
The CEO of Drivezy, Ashwarya Singh, said,
“We have already been working with AnyPay on our security token project, RentalCoins 1.0 since December 2017. It has enabled us to accelerate our growth dramatically, allowing us to add hundreds of vehicles on our platform, and we have been distributing a healthy return to our investors since February.”
The founder and chairman of AnyPay group remains optimistic on the future of STOs. He also spoke about the company’s vision of making tokenization of equity and assets more accessible to new companies.He said,
“I am convinced that it is in Finance that blockchain will be used as a tool, and our mission is to create a mechanism where we can distribute funds to those in need by lowering the costs and providing liquidity to what has traditionally been illiquid.”