Security Token Offering was created to bring the institutional investors on board the cryptocurrency and blockchain era. Through the trustless network, blockchain will automate the legal and auditing requirements with the integration of smart contracts.
Security tokens are financial securities that are SEC compliant. These tokens provide the investors with an array of financial rights that are written in smart contracts and the underlying tokens that are traded on the blockchain.
At Fatchemist , we don’t just build, but we pioneer in Security Token Platform Development. The tokens can be developed on your own blockchain that offers zero gas prices, enables faster transactions with no congestion of networks, and more.
That’s not all, Fatchemist has access to a network of investors, who would fund your project through Security Token Offering (STOs).
Security Token Technology
The Ethereum Blockchain with ERC-20 does not suffice the requirements of the securities backed tokens. The major issues include gas prices, congestion in the networks and protocol issues. To overcome the issues, Fatchemist develops customized scalable blockchain and smart contracts to fit the requirements either on Ethereum or Hyperledger or Stellar.
The following are the features :
- Legally Compliant Tokens
The tokens issued are embedded with smart contract which has the regulations of the registered jurisdiction coded. These include legal frameworks of fundraising, investor qualification rules & transaction limits on transfer.
- Global Investor Participation
Issuance companies face problems during secondary trading when different countries are involved. Our tokens can be traded across borders with the idea that the tokens issued are securities and must comply with securities laws. The token sales and secondary trading are developed with conditionality on the smart contract.
Blockchain ensures all the transactions including the conditional are visible to the financial regulators. The benefits of a transparent ecosystem will help the cryptocurrency market under the purview of the government regulation. The process of transfer agents are being automated the entrepreneurs can raise funds in a simpler and a cost effective way.
At Fatchemist , we develop a technology which allows the issuance companies to reissue tokens to the investors if the investor loses their wallet keys subject to terms and conditions. The wallet must compatible to the legal requirements and investor must have the right to reclaim his lost tokens.
Types of STO(Security Token Offering) Development
- Equity Token
An STO where each token is backed by the stock in your company so that the holders of your token have equal rights to your actual stockholders in terms of votings and dividend issuance.
- Reserve Assets Token
- Debt Token
If your company would rather not tokenize your stock or reserve assets, you can raise funds by issuing Security Tokens with the promise of payback to attract debt investors.
Steps for STO Development
- Step 1
Finding the securities which the issuance company to tokenize such as commercial estate. We at Fatchemist carry out our due diligence for tokenization.
- Step 2
- Step 3
A Special Purpose Vehicle or Entity(SPV/SPE) is formed especially when tokenizing securities for only the purpose of trading security tokens.
- Step 4
The technology behind the Tokenized Securities is the strength of Fatchemist. We believe ERC-20 is not an ideal solution for STO due to the gas prices, congestion of networks and changes in protocols. Fatchemist will build customized blockchains with inbuilt smart contracts on top of the Ethereum or in Hyperledger or Stellar.
- Step 5
The valuation of these securities are scrutinized by an auditing firm , post-which a value per token is suggested and the issuance company such as yours can issue a token at that price.