Capco Institute Journal #52: New Working Paradigms

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SECURITY TOKEN OFFERING – NEW WAY OF FINANCING IN THE DIGITAL ERA

 

SEEN-MENG CHEW | Associate Professor of Practice in Finance, and Assistant Dean for External Engagement, CUHK Business School
FLORIAN SPIEGL | Co-founder and COO, FinFabrik




In this article, we compare the fundraising processes of initial public offerings (IPOs) and security token offerings (STOs) and explain how the STO process can be operationally more efficient and less costly using distributed ledger technology. We also highlight recent technological advancements surrounding STOs and the world of decentralized finance. We collate information about recent developments in regulation and digital exchanges to support the growth of STOs. We emphasize some important issues to tackle before STOs can be widely accepted as the new way of financing for companies. Finally, we argue that although STOs have the potential to revolutionize the security value chain, they do not have to replace IPOs completely, and the two channels can coexist to provide more opportunities for businesses.