Security tokens are different from utility tokens in a few ways, and the main difference is that security coins have to follow some stringent guidelines regarding who can purchase them and how they are transferred. Nonetheless, for investors looking for enhanced transparency and protection in the long term, securities are the viable option.
Securities transactions require certain regulatory standards before engaging in the process itself. The regulations are the main thing that makes security tokens different from the utility ones. Understanding the complete life cycle of such tokens will help you better understand how transactions take place.
Issuance of securities
This is basically the first coin transaction. Securities are issued in more ways and in most cases, investors acquire them during an STO (security token offering). The platforms that organize STOs integrate all the SEC’s requirements into the token development.
It’s essential to learn that securities meet both Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. This is because the legislation requires companies and investors to provide all relevant data regarding the transactions. The standards are common practice in the banking industry for enhanced security and trust.
More than that, unlike an ICO, and STO needs the validation of the investors’ identity. This means that securities cannot be transferred to anonymous or random individuals. All these requirements have led to the development of security coin only exchanges.
Exchanges and custodial wallets
Exchange transfers are another form of transactions. They are different from regular crypto exchanges because there are not anonymous accounts or privacy coins allowed here. The main concern regarding securities is how they’re handled when they’re on exchanges.
Long story short, security exchanges are using special formatted custodial wallets that comply with all requirements and regulations holding securities for clients.
The complex nature of securities legislation built the perfect opportunity for transfer agents – professionals who help investors transfer their tokens properly.
Security token transactions
This is still a work in progress, and a lot depends on what the SEC decides more about the integration of the crypto market in the financial world. Developers continue to host meetings in order to enhance developments in the security token sector.
You can learn more details and advantages of securities by heading over to securities.io.
Henry Lares is still early into his career as tech reporter but has already had his work published in many major publications including Tech Crunch and the Huffington Post. In regards to academics, Henry earned an engineering degree from Apex Technical School. Henry has a passion for emerging technology and covers upcoming products and breakthroughs in science and tech.