Getting started with your Security Token Launch
In the last couple of years, ICOs have been very successful, however, the controversy surrounding legitimacy of ICOs has made some countries ban them, while other countries like Switzerland, Singapore etc. consider passing harsh legislation against them. In order to seek foreign investments, businesses are considering Security Token Offerings which is not just another name of an Initial Coin Offering (ICO), but are completely different. In contrast, STOs are backed by real assets such as gold, oil, equity etc. which makes them legal in the eyes of authorities.
The major shift from ICOs to STOs is being considered all around the globe due to the simple fact that security tokens offer legal compliance. This makes more investors interested in security token business models as they hold potential in the blockchain niche.
However, for an STO Launch, you must consider some important aspects, which we have described below:
1. Determining the need for an STO
As an early adopter of blockchain technology, you must be able to articulate why a Security Token Launch can be transformational for your business. The journey is very long and the investors will test your knowledge and scrutinize your well-research business use case before investing their hard earned money.
First things first, it is very important for a company to assess its readiness for a fundraising. This, in particular, starts with considering the following diagnostic questions.
- Is your business investable? Can you showcase the three key metrics i.e. Growth, Control and Quality to the investors?
- How much does your customer base increase over the last few years?
- Do your customers often interact with your product/service?
- How much do you wish to raise and for what you are raising?
- Have you ever been a part of crowdfunding before?
- How many investor meets were successful so far?
- Have you defined your target audience?
- How much funds will you use for your company’s growth upon reaching your crowdfunding goals?
2. Regulations to be considered
As you are planning to enter the US market, you must ensure that your services are asset-backed and your token offerings are classified as securities. In order to do so, your offerings must pass the Howey and other alternate tests. We have talked about these regulations in our previous blog on Security Token Offering.
However, if your offerings fail the Howey Test and are not subject to federal securities and guidelines then your tokens will disqualify to be a security token and will be considered as utility tokens.
3. Token Registration
First, come up with a name that goes well with your STO offerings, further choose a token symbol. This will likewise enable you to reserve your symbol and prevent others from misusing it. You might need some legal assistance here to fine-tune the various aspects of the entire process, however your STO development company can guide you through the entire process. Once finished, you can submit your reservation details. The confirmation will be sent to you by the token issuance platform through an email. If you have ever been a part of an ICO, then so far this works similar to that.
4. Choosing a token issuance platform
There are many token issuance platforms that render token issuance services, we being one of the most noted names when it comes to Security Token Offering Services can help you sail through the entire process. However, depending upon your Security Token requirements, you will need to make sure whether you want launch asset-backed tokens or you are looking out simply for security tokens.
5. Leveraging Whitepaper Marketing
The importance of whitepaper cannot be underestimated as it is the bible which talks about your business and future goals. Your business prospects can read about security tokens and regulations and understand how the industry works along with token usage details and team members.
Once your whitepaper is ready, you should seek expertise from industry leaders and build a team, this will help you gain credibility.
6. Empanel Experts
Now, you will need a team of experts who are well-versed with cryptocurrency and blockchain technology, just make sure to empanel people from various departments such as accounting, sales and marketing, legal industry etc. This will make sure that your STO Launch is passing all the regulatory frameworks and tests depending upon the targeted geography.
7. Marketing your STO platform
Kick-start by making a website which will cover all the key details such as development roadmap, token distribution information, the whitepaper and the idea behind the project. Add a customer support channel and embed the live token sale countdown on the website. Further, you can leverage other platforms such as Medium And Hackernoon and other ICO/STO listing platforms which will introduce you directly to the crypto community.
8. Token Creation for STO Launch
Now you will be required to include supplementary information about your STO platform and the token. In order to do so, it is advised that you must have a legal and marketing team by your side.
For doing so, you must be able to execute transactions on the smart contracts. This can be done by using MyEtherWallet (MEW) using which you can sign transactions and execute them using Metamask Chrome Extension. Here, you will be prompted to add your website where you can add a link to your website. Once done with this, click on the Submit button for token issuance.
9. Structuring your Security Token Offering
There are some points that you must consider before structuring your STO, please note that if you are running a capped STO then only a certain number of tokens that have a predetermined price can be sold. Once these tokens are sold, you cannot sell any token further.
The STO structuring comes with a checklist, to kick-start, you need to outline the start and end date of your STO followed by supported methods of payments and rate of token valuation.
10. Investors’ Whitelisting
Finally, you will be required to chalk down the list of future investors for the tokens. However, this can be done before or even after your STO. The investor will be issued with your security token where in exchange for supporting cryptocurrencies like Bitcoin or Ether or even Fiat in some cases.
Congratulations! Now you have your own regulatory-compliant security token on Ethereum testnet!
Note: You can also mint (create) tokens for existing shareholders, which is optional. This implies to the fact that security tokens can be minted on an “as per the requirement” basis when requested.
We provide end-to-end custom solutions for STO development. Email us today at [email protected] to develop your own security token or to embed regulatory requirements into your token ecosystem.