Security Token Offering

Definition ∞ a Security Token Offering STO is a method of raising capital through the issuance of digital tokens that represent ownership in an underlying asset or enterprise. These tokens are classified as securities and are subject to traditional securities regulations, offering investors legal rights such as dividends, voting rights, or profit sharing. STOs combine the efficiency of blockchain technology with the legal compliance of traditional financial instruments. They provide a regulated pathway for fractionalized ownership of various assets.
Context ∞ News frequently discusses Security Token Offerings as a compliant alternative to unregulated initial coin offerings ICOs for fundraising in the digital asset space. STOs aim to bridge the gap between traditional capital markets and blockchain technology, offering increased liquidity and global access for private assets. Regulatory clarity and the development of robust trading platforms are crucial for their broader adoption. The evolution of STOs continues to shape the future of digital asset-backed securities.