Blockchain & Cryptocurrency Glossary

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.

  • search-icon Clear Definitions
  • search-icon Practical
  • search-icon Technical
  • search-icon Related Terms

Securities Token Offering (STO)

1 min read
Pronunciation
[es-tee-oh]
Analogy
An STO is like issuing digital stock certificates that you can trade on a blockchain-based platform.
Definition
The issuance of tokenized financial securities on a blockchain, compliant with applicable regulations, representing equity, debt, or other assets.
Key Points Intro
STOs blend traditional securities regulation with blockchain-based tokenization.
Key Points

Regulatory compliance: adheres to securities laws (e.g., Reg D, Reg S)

Token standards: uses ERC-1400 or ST-20 for transfer restrictions

Investor accreditation: verifies accredited status on-chain

Secondary markets: supports regulated trading venues

Example
A real estate fund issues ERC-1400 tokens representing ownership shares, enabling investors to trade on licensed security token exchanges.
Technical Deep Dive
STO platforms integrate KYC/AML modules, whitelist smart contracts to enforce transfer restrictions, and use on-chain registries for cap table management. Token contracts implement hooks (ERC-1400’s `canTransfer`) to validate trades against regulatory rules before allowing transfers.
Security Warning
Failure to comply with securities regulations can result in token delisting, fines, or legal action.
Caveat
Regulatory complexity and limited liquidity in security token markets can hinder adoption.
Related Terms
Tokenization
Security Token Exchange

Securities Token Offering (STO) - Related Articles

No related articles for this term.