New blockchain fund-raising method able to take hold
CGTN's Mi Jiayi
The security token offering (STO) is becoming an ideal new way for companies to raise money for digital currency aspirations in many countries, including the US and Germany, but not China.
Blockchain-based STOs are a way for companies to attract investment, similar to ICOs (initial coin offerings).
By issuing digital tokens based on companies' real equity, including company shares, real estate, or annual revenue, STOs are considered to be a more reliable fundraising method since ICOs are not backed by any real assets and the offering of STOs has to be approved by stock regulators.
“For the benefits of investors, they have the way to gain access to more asset portfolios in the global financial market and are more protected compared to ICOs because they are regulated by governments,” Harry Miao, vice president of Ledger Capital, said, noting the risks investors face, as many are blinded by an influx of fancy terms and concepts that deprive them of the ability to see what's behind the tokens.
There aren't many STOs out there at the moment, while the most recent one was issued this year by tZERO, a subsidiary of US e-commerce site Overstock.com, raising 134 million US dollars from over 1,000 global investors during its STO. The company said the STO was conducted in full compliance with US securities laws, and all the investors met regulatory requirements.
This new fundraising method is not available in China yet, partly because regulators are cautious about blockchain related innovations. But some are optimistic about STOs as they are more regulation-based technology.
“Even though there's no STO regulation in China yet, the Chinese regulators have identified blockchain tech as a disruption as well as an opportunity,” said Han Lei, the founder and CEO of Capstone Capital Group. Han believes that regulations in China will have a similar philosophy as the SEC (US Securities and Exchange Commission), wherein the investors' interest is protected through regulations while encouraging technological innovation and development.
“A major advantage for China is that we can move faster and more efficiently than other countries,” he added.
Initial coin offerings were banned by the government this year after the People's Bank of China (PBOC) publicly denounced fundraising in new blockchain-based currencies in September.