ICOSERVICE- the Best Marketing Agency to help You Launch a Security Token Offering (STO)

Now, a new concept is gaining mainstream acceptance. This new concept is referred to as a Security Token Offering (STO).

But this time, companies and start-ups planning to join the STO bandwagon will need some high level of finesse so as to be successfully. 2017 saw many ICOs dominate the market but not all of them were legit and this has made investors to be more careful. As a result, start-ups and companies planning an STO will need a solid strategy or partner with a team of experts who have studied the blockchain industry and its related technologies.

• An example of such a team is the ICOSERVICE Marketing Agency. ICO SERVICE comprises a team of experts who have spent time in the marketing, financial, legal, technology, and blockchain trenches and hence are equipped with insights about conducting a proper STO.

To define a security token, let’s first look at the Howey Test. Basically, the Howey Test is a principle that asks whether the value of a transaction for one of its participants is dependent upon the other’s work. At its core, the Howey Test determines that a transaction represents an investment contract if “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”

• According to Investopedia, the Howey Test refers to a 1946 case which reached the Supreme Court, SEC v. W.J. Howey Co., a lawsuit involving the Howey Company, a citrus farm which operated on a large swath of land in the southern portion of the Florida state. When the company decided to lease out half of its land so as to “finance an additional development,” a debate ensued. The debate was about whether or not the land itself could be seen as a security. The buyers were just speculators as they had no knowledge, skill, and equipment necessary for the care and cultivation of citrus trees. They bought the land based on the assumption that it would generate a profit for them as a result of the efforts of someone else.

The U.S. Securities and Exchange Commission (SEC) decided to intervene by blocking the sale of the land when Howey Co. failed to register the transactions. But the case was appealed and arrived in the U.S. Supreme Court. The U.S. Supreme Court ruled that “the transactions in this case clearly involve investment contracts, as so defined. The respondent companies are offering something more than fee simple interests in land…they are offering an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise.”

In the case of Howey Co., the investors in the Florida land saw the transaction as valuable only because of the work that others would perform on the land. By the standards of the Howey Test, this classifies the transactions as an investment contract and hence the transaction needed to be registered, and the Howey Co. was found to have violated the law by failing to do that.

• The point here is that the Howey Test has been a notable reference point when it comes to regulatory oversight for many decades; and now it is being referenced again most frequently in conversations involving cryptocurrencies and the blockchain technology. The operative question in regards to the Howey Test is whether or not cryptocurrency investors are participating in a speculative enterprise, and if so, if the profits those investors are hoping for are entirely upon the work of a third party.

Therefore, a security token is a crypto token that passes the Howey Test and they usually derive their value from an external, tradable asset. Because the tokens are seen as a security, they are subject to federal securities and regulations. In other words, security token offerings combine aspects of ICOs with IPOs to provide the seemingly perfect balance between gaining access to capital at a low-cost while remaining compliant with securities laws.

This is achieved through security tokens which are essentially digital, liquid contracts for fractions of any asset that already has value (think a real estate property, a car, a painting, equity in a company, etc.). These tokens are meant to operate more like traditional securities and to meet all the requirements of the SEC.

Security Tokens are subject to federal security regulations and in the U.S., in particular they need to follow these regulations:

Regulation D

Regulation D allows a particular offering to avoid being registered by the SEC as long as “Form D” has been filled by the creators after the securities have been sold. The company or start-up which is offering this security may solicit offerings from investors in compliance with Section 506C.

And Section 506C normally requires verification that the investors are indeed accredited and the information which has been provided during the solicitation is “free from false or misleading statements.”

Regulation A+

This exemption allows will allow the creator to offer SEC-approved security to non-accredited investors through a general solicitation for up to $50 million in investment. In order for the requirement to register the security, the issuance of Regulation A+ can take a lot more time compared to other options. For this reason, Regulation A+ issuance will be more expensive than any other option.

Regulation S

This applies when a security offering is executed in a country apart from the U.S. and is therefore not subjected to the registration requirement under section 5 of the 1993 Act. However, the creators are still required to follow the security regulations of the country where they are supposed to be executed.

Data from Polymath- the first security token platform- shows that security token offerings will prevail on the market by 2020 and will be more than $10 trillion. The security token offering industry is really gaining traction and will soon hit the mainstream. Various platforms and multiple exchanges have either already integrated the support of security tokens or are making plans.

The following are, in fact, making plans to integrate the security token functionality into their platforms.

• SIX Swiss Exchange
• Templum
• Coinbase
• London Stock Exchange
• Gibraltar Stock Exchange
• SharesPost

Here’s why:

STOs can improve the traditional financial sector

We know very well that in an IPO, most private assets are relatively illiquid, which means investors face a difficult and costly time trying to convert them into cash. Besides, access to capital has never been easy for early stage companies and not to mention that traditional financial transactions can be expensive thanks to the fees associated with the middlemen like banks. Security tokens remove the need for middlemen which reduces fees as smart contracts will be able to automate many of these processes that requires middlemen.

STOs comes with improved security

Honestly speaking, most people fear investing in ICOs since most of them turned out to be scams and this somewhat did a great disservice to blockchain technology. Data from Statis Group shows that more than 80% of ICOs conducted in 2017 were scams while other studies show that more than a thousand crypto projects are already “dead” as of June 2018.

• ICO Rating’s market Research Q2 2018 reported that 50% of the ICO projects announced in Q2 of 2018 were not able to attract more than $100,000 and only 7% of all announced ICOs were able to be listed on exchanges. 55% of ICOs failed to complete their offerings.

The medium return from tokens in Q2 was – 55.38%, compared to +49.32% in Q1. ROI after 3 days on an exchange in Q2 18 was – 21.59% with 57% of tokens trading below the ICO price. The reason for this is that there is a lack of regulation for utility tokens. But STOs will help improve the crypto space as they are subject to regulation and provides no room for scams.

STOs will increase the exposure to free market

Chinese investors find it difficult to invest in private U.S. companies and the reverse is also true. That’s why we need security tokens as companies/start-ups can easily market their products/ideas to anyone across the globe on the internet. This exposure to free market helps in increasing asset valuation and exposes start-ups to a large pool of investors.

STOs provide start-ups with better terms

• Normally in an IPO investors get to have more control over the company/start-ups compared to the founders. But security token offerings are set to rewrite this as companies do not have to give up control of their company.

For equity STOs, companies can sell common stock instead of preferred stock. This effectively lets the founders retain a higher percentage ownership in their company, especially in downside scenarios.

ICOSERVICE enables you to easily sell your security tokens via security token offering (STO) crowd-sale. We will help you raise millions of dollars by providing marketing services and STO-based knowledge. Essentially:

• We provide end to end STO management- from scratch we can take projects, run it right through to launch phase.
• Our marketing strategy is customer/investor-focussed.
• We provide web-design services and social media management, that is, promotion on Bitcointalk forum, Telegram channel, publishing on social channels such as Facebook, Twitter, Adwords and Reddit.
• We make sure that your project reaches the entire blockchain community and all the possible investors- community building is a key aspect of well-constructed STOs. With our extensive network we are able to fully sell your project.
• We do Bounty Program Development- we design effective bounty campaigns.
• We do Security Token Design- That is design security tokens that have multiple dimensions of value, and create the conditions for a sustainable ecosystem.
• We ensure that your STO follows all legal grounds- that is we connect you to the countries that have proper regulatory frameworks in place to deal with security token sales.
• We ensure that your whitepaper is accurate and solid enough- Whitepapers are the backbone of every STO and the foundation of a crypto project. We, therefore, ensure that yours is relatable and comprehensive.
• We are experts- this means we have developers who can do code audits and offer detailed analysis of your code. Companies and start-ups can also leverage our knowledge-base to ensure that your project has the highest level of development architecture.
• We also offer escrow services to STOs with a desire to have the capital stored by a reputable group and distributed upon meeting certain goals.