While the blockchain technology offers a lot of advantages like immutability, transparency, and security, the fact that some of its applications were outside the purview of any regulatory framework was considered one of the most major limitations.These limitations manifested themselves in the form of scams that had marred the image of Initial Coin Offering (ICO).
The ICO, which was considered to be a revolution for raising funds for crypto projects, however, more than 80% scam-rate because of the lack of oversight.Establishing security… Literally!Tokenization, initially, was not designed to fit into any legal system.
These tokens entitle the possessor to partial ownership in the assets or voting rights or both.Security Token Offerings are expected to open the floodgates to the opportunities of investments.
This will help in enhancing the flexibility and access of your tokens without compromising on the security aspects.The United StatesBringing in the STO under the legal purview of a regulatory body like the Securities and Exchanges Commission (SEC) puts a lot of restrictions on the companies and the investors as well.
It is essential that every investor has to pass the KYC/AML (Know Your Customer/Anti-Money Laundering) requirements.Regulation 506(b) – this is a private placement exemption without general solicitation where a maximum of 35 non-accredited investors make purchase tokens.Regulation Crowdfunding – as the name implies, this regulation is an exemption for small offerings up to a maximum of 1.07 million dollars during a 12 month period with a limitation on the amount that an investor can invest.Limited offering under Rule 504 is for eligible companies where up to 5 million dollars can be raised over a 12 month period and the issue has to comply with the blue sky laws.Regulation A+ – this regulation has a possibility of two tiers being applied.
The first tier is for offering up to 20 million dollars in a 12 month period, and 2nd tier is for offering up to 50 million dollars in a 12 month period.