What is a security token?

A security token is a digital representation of fractional ownership over an underlying investment asset such as corporate stocks, bonds, or real estate investment funds (REITs).

They are highly regulated because they are considered “securities” or a form of investment that promises future profits.

Security tokens are issued using blockchain technology through a process called security token offering (STO). A company can conduct an STO by holding a public event where security tokens are sold via cryptocurrency exchanges.

What sets STOs apart from other ways of raising funds is that it combines the advantage of being on the blockchain while providing a blanket of protection for investors because they are regulated and have to be legally compliant.