A few months ago, Polymath one of the most reputable security token offering platforms decided to move its Polymesh Blockchain platform from Ethereum to Parity Substrate, a platform that was developed by Parity Applied Sciences that is owned by Gavin Wooden, who was Ethereum’s co-founder.

This came just a few months after introducing Polymesh, which is a security token specific blockchain. Polymesh was initially built on Ethereum and Polymath had also gone ahead and built an SDK (a suite of developer tools for security token issuers and white-labellers) that want to issue security tokens on Ethereum.

Reason for migrating

The main reason for the fallout is the fact that Ethereum uses proof-of-work (PoW) consensus mechanism, which does not go well with security tokens, though it plans to upgrade to proof-of-stake (PoS).

Adam Dossa, the head of Polymath’s blockchain, had earlier stated in a telephone interview that though Ethereum has some great attributes, the world of regulated security tokens is quite different from that of Ethereum. Dossa was quick to identify that PoW posses a serious problem known as block reorgs where blocks of data containing transaction information can be rolled again to annul a disputed transaction.

Dossa also touched on the way Ethereum settles transactions, saying that since it uses mining to settle its transactions and miners can operate from any location in the world, establishments dealing with securities could be scrutinized by authorities if the charges paid to the miners are traced to a nation that is already sanctioned.

What did the migration mean?

By changing the platform on which its products are built on, Polymath decided to embark on a journey to migrate its ST20 security token development standard, which was initially constructed through Ethereum’s ERC-1400 token standard, to Parity Substrate. Besides, Polymath also had to migrate its token, the POLY (which is an ERC-20 token) from Ethereum to Parity Substrate.

Adam Dossa, however, stated via an email that they shall maintain a bridge for the POLY token for at least one year.

On their part, Parity agreed to develop a sure business-logic option on the base layer of Ploymesh. It shall also construct decent runtime and contract communication modules.

Why Substrate?

The head of Polymath’s blockchain stated that other candidates had been considered before settling on Substrate. One of the Candidates was Hyperledger Cloth among others.

However, Dossa described Parity Substrate as a “modular, versatile framework”. He also pointed out that it is simple to construct good contracts from the bottom up on Substrate, which is a great thing for Polymesh.

Parity Substrate has offered solutions to a number of consensus mechanisms in the past, some of which are even customized. Also, transactions performed via Substrate are final and cannot be undone.

The current COVID-19 pandemic is threatening to bring the world to a standstill. Everybody, famous or infamous, rich or poor, has currently been rendered equal in fear. Governments in America, Asia, Europe, Middle-East and Africa are going for a total lockdown to try and stop the spread of this killer virus that has claimed thousands of lives around the world and still spreading like bush fire.

Many businesses have closed shops in these difficult times. Others have opted for unorthodox means to try and stay relevant while hoping and praying for the return of better days.

However, for the FinTech industry, it is a race against time to try and offer solutions to the COVID-19 pandemic using Blockchain technology.

Blockchain technology has been hailed as the mother of all inventions in the 21st century. It has offered numerous solutions to many problems that have affected humankind over the ages. Currently, almost all departments ranging from, infrastructure, healthcare, transport, communication, and sports have adopted blockchain technology.

WHO launches a blockchain platform to Fight COVID-19 in partnership with blockchain and tech companies

With the COVID-19 Pandemic unfolding too fast for institutions and governments to keep track of the data concerning the Pandemic, the World Health Organization (WHO) in partnership with tech and blockchain companies launched a blockchain platform called Mipasa that would help in sharing information on the coronavirus.

Mipasa is based on distributed ledger technology (DLT). Its main purpose is to help in the early detection of those infected with the COVID-19 especially in the infection hotspots.

The companies involved in the development of the platform include Hacera, an enterprise blockchain platform, Microsoft, an IT corporation, IBM, a technology company and Oracle a computer firm.

The fact that the platform uses blockchain technology makes the shared information full-proof to doctoring. The platform shall also facilitate private sharing of information between individuals, health institutions and organizations as well as state authorities. Therefore the patient’s privacy is guaranteed.

According to the platform’s official website:

“MiPasa can help monitor and foresee local and global epidemiological trends and detect likely asymptomatic carriers by feeding big data on infection routes and occurrences to powerful AI processors around the world.”

The platform has also received backing from several state health institutions including the Centers for Disease Control and Prevention in Europe, the US, and China. The Department of Health of Hong Kong, China’s National Health Commission and the Government of Canada have also offered to contribute to the project.

UAE’s Ministry of Community Development (MOCD) is also adopting DLT-based solutions

The Ministry of Community Development (MOCD) in the United Arab Emirates has also been reported to adopt DLT-based solutions to facilitate the work from home situation.  DLT shall make it possible for the distribution of official documents and identity verification, thus allowing the customers to engage with the MOCD at the comfort of their homes.

Blockchain proposed as the best means for the US to distribute the stimulus package

There are suggestions that the United States Government should consider using blockchain technology, especially DLT to distribute the stimulus package that the government intends to give. Experts have suggested that the US could launch a “digital dollar” based on the DLT.

China also using DLT to censor the spread of the Virus

China which was the starting point for the Coronavirus pandemic deployed blockchain in a number of areas in its efforts to fight the virus. It has adopted DLT to track the spread of the virus, distribute medical supplies, monitor health records and also distribute charity donations.

Could blockchain help in winning the fight against COVID-19?

It shall only be a matter of time before we get the real answer to this question. However, governments, institutions, organizations, and individuals have adopted the use of blockchain technology as the fight against COVID-19 intensifies.

There are reports that over one million personal computer users have donated their processing power to a distributed computing project being referred to as Folding@Home that is working on the simulation of protein dynamics, to find out therapies that can be used for the COVID-19 patients.

There are also reports that Bitcoin users and miners have also joined in the fight. A group of Bitcoin users calling themselves “CoroHope” are said to be working on a coronavirus vaccine.

Fractional ownership through blockchain technology is the new haven for companies and startups looking to raise capital from investors in exchange for a stake in the companies/projects. Traditionally, companies and startups could only do so through the traditional shares market.

In the traditional shares market, shareholders have to undergo rigorous selling and buying procedures, which also involved lots of paperwork. Investors also have to invest the full minimum required amount to own at least one share of a company or startup.

But thanks to blockchain technology. Companies and startups can now digitize or tokenize assets and offer them as digitized securities also referred to as tokens, rather than as traditional shares. By doing so, people looking to own a stake in the companies/projects can now do so by purchasing the digitized securities, which are normally transferred through blockchain networks rather than through the traditional stock market platforms.

Fractional ownership

Fractional ownership refers to the ability of an investor to own a fraction of a company or startup asset. For this to happen, the asset must first be converted into a form that can be divided into fractions, which is normally possible through asset tokenization.

Traditional shares are normally offered as whole numbers without the possibility of breaking them into fractions. Therefore, investors can only purchase whole shares. For instance, an investor can purchase 1, 2, 3, 4, 5, etc. shares from a certain company, but cannot purchase 0.5, 0.3, 1.3, 1.5, etc. shares.

On the other hand, digitized assets are easily offered as fractions/decimals thus enabling fractional ownership.Investors can purchase 0.1, 0.5, 1.4, etc. digitized assets.

Contrary to the traditional shares market where investors are required to invest a minimum amount to purchase shares, security tokens can be offered as fractions or decimals, therefore, allowing fractional ownership.

Asset tokenization changes how asset ownership is managed and also automates the activities that come after investment.

Blockchain technology makes it possible to have instant, traceable and cryptographically secure distribution and transfer of the digitized assets (tokens) without the need for intermediary parties.

Besides, contrary to the traditional securities, tokens of the digitized assets are issued and settled on a blockchain network. Therefore, the transactions are instant and without the need of signing stock certificates. And this process is not time-bound; it can take place 24/7.

Advantages of using digitized assets (digital securities)

The digital assets can be offered through smart contracts or security token offerings (STOs), where the holders acquire fractional ownership of the company/project behind the tokens.

These digital securities can also be exchanged in secondary markets just like other cryptocurrencies. When an asset is digitized, shareholders can use smart contracts to promptly sell their securities on registered exchanges where there is high liquidity compared to the traditional shares market. This in return help in avoiding the long lockup period of capital that is witnessed in the traditional shares markets

The beauty of it is that companies and projects can basically tokenize any assets whenever the need arises.

Comparing traditional securities to digital securities

Traditional securities (shares) normally call for larger investments while digital securities (digitized assets) allow fractional ownership, which reduces the amount of the required investment.

Additionally, since traditional securities require large investments, access to significant funding can only be done by institutional investors while in digital securities, since there is fractional ownership, there is a large pool of investors which makes it easy to quickly access significant funding.

Secondly, in traditional securities, the capital is usually tied up, especially with private placements like the venture capitals. However, with the digital securities investors can sell the tokens at secondary markets where there is high liquidity.

Traditional securities are also too costly due to the high fee structures. But the digital securities have a low fee structure due to automation using blockchain technology.

 

Though ICOs and STOs are great fundraising methods that startups can use in raising funds for their projects, it is paramount to asses the risks involved.

Launching ICOs/STO requires quite an amount of investment and therefore requires due diligence to ensure that that money is used for the right cause.

Besides, the sole purpose of the ICO or STO is to raise funds for your project. So, one should assess whether the ICO/STO shall be able to meet its target.

What to consider when doing ICO/STO risk assessment

In assessing your ICO/STO, you should consider the following:

  1. Market assessment

It is good to keep in mind that the market shall play a very great role in the success of your ICO/STO and your project.

Before launching your ICO/STO, it is good to assess the market to find out if your project shall be accepted and even adopted by a significant number of people. If a lot of people like your project, they shall be ready to invest in it. However, if people don’t find the project to be worth it, they will not be interested in investing in it and your ICO/STO could end up being a total failure.

To ensure that your project fits in the market, you should ensure that it tackles a solution to something crucial in society. Your solution must also be viable and unique. Remember, you also have other competitors and you have to prove to the people that your project is better than the rest.

Besides, you must be able to identify your target group. You must clearly distinguish the people that you want your project to help. This ensures that your marketing strategies are trained towards this group. And the wider the target group, the higher the likelihood of finding more investors. To identify a target group, you should ask yourself what services your project intends to offer; and who is best suited for those services.

  1. Regulatory risk assessment

This is very critical in launching an ICO/STO.

You have to understand what is required of you depending on the regulations that are set within the region or country where you want to run your fundraising. Failure to adhere to those regulations could cost you a lot and could even result in your ICO/STO or project being put on hold by the regulatory authorities.

Since at times those laws and regulations are quite intricate, like when launching an STO, it is good to involve an ICO or STO advisory firm to help you maneuver those regulatory issues.

Legal liabilities can be very costly to your company or startup especially if you are involved in court cases. Also, once it goes public that your project is on trial at the courts, people/investors will tend to become extra cautious and it may hamper the rate at which people find it worthy to invest in the project even if you manage to handle the cases.

Why do an ICO/STO risk assessment?

  • Preparing yourself for eventualities in future

Countries and regions are still struggling with regulation cryptocurrencies and blockchain technology. As a result, most of the countries are still formulating laws and regulations to govern anything related to blockchain technology.

Therefore, your antennas should be up all the time to ensure that your blockchain project adheres to all the laws; even those that were just released. The best way to do this is by looking for a competent advisory firm like Gravitas International that will be concerned with the regulatory issues.

A good advisory firm will help you maneuver the current legal matters and also prepare you for legal issues that may come up in the future.

  • Ensuring that you ICO/STO does not violate any laws/regulation

There is nothing that can be bad like finding yourself on the wrong side of the law.

Risk assessment ensures that you are on the right side of the law.

  • Estimating the success of your ICO/STO

Carrying out a risk assessment, enables you to find out your weak points and helps you to come up with ways of improving to ensure maximum success of your ICO/STO.

It also enables your team to identify risks and develop plans and contingencies to mitigate risks for your investors. This instills confidence in the investors.

Commercial real estate business in Japan is undergoing a radical revolutionization as tech companies come up with new innovative ways to make the industry more efficient and tech survey. These tech companies in collaboration with the real estate developers have devised ways of tokenizing real estates using security tokens.

Several companies in Japan among them Securitize, LIFULL, and Lead Real Estate, have announced the creation of real estate investment platforms that will allow the use of digital securities better known as security tokens.

In partnership with LIFULL, Securitize, which is a tokenization firm aims to promote real estate crowdfunding through blockchain technology and it is being sponsored by Nomura, MUFG and Sony Financial Ventures.

LIFULL, which is listed on the Tokyo Stock Exchange, provides real estate information services in Japan and it has 14 subsidiaries. LIFULL is the one that started the development of the real estate crowdfunding platform in partnership with BUIDL, which was later acquired by Securitize. In their trial version, they were able to reduce the costs of operation, improve the efficiency of divided payments and automate the distribution of the security tokens.

To their advantage, Securitize developed a tokenized securities compliance platform that makes it possible for the security tokens to be traded on secondary marketplaces.

Lead Real Estate, on the other hand, is already using blockchain with the help of Securitize to fund the construction of hotels and condominiums ahead of the Olympics 2020, which will be held in 2020.

What is Real estate tokenization?

Commercial real estate business is recognized to be among the most profitable businesses in the world. However, the traditional business model employed in real estate limits many investors from investing in the business since it requires a substantial amount of capital even though it is a viable investment option.

Thanks to blockchain technology through asset tokenization, the commercial real estate industry can now be tokenized.

Real estate tokenization refers to the practice of using tokens to represent real estate assets. The tokens can then be sold out or offered at a price to investors. By owning the real estate tokens, the investors respectively own a share of the real estate project and they are entitled to a share of the rental yield accordingly or profits originating from the sale of the assets.

Advantages of real estate tokenization

Blockchain is known to be an incontrovertible distributed ledger, whereby the data/information stored/recorded cannot be altered unless the whole network is brought down. As a result, it brings transparency, enhanced security, reduced costs of processes, traceability, and storage of immutable documents.

Of utmost importance to the real estate market is the ability of blockchain to allow the execution of transactions without the need for an intermediary. The transactions are only between the involved parties and they are stored in a ledger that holds the history of the transaction, the property involved or the asset involved and the title. Therefore, real estate tokenization eliminates the need for lawyers, brokers, and agents.

Tokenization also offers investors the ability to transact using digital currencies like Bitcoin and the like. This, in addition, is cheaper since the buyers bypass the fees that banks could have included.

Furthermore, the use of Escrow and smart contracts makes it easier and efficient to transfer title deeds upon payments.

Most importantly, real estate tokenization makes it easy for the common man to own a share of a real estate through crowd ownership. A person can invest a small amount of money by purchasing the minimum required amount of security tokens in real estate to become a shareholder of real estate. Also, the security tokens are more liquid and owners can trade them thus fostering growth-financing.

Below is a case study of a process done using blockchain technology without the use of middlemen or the need for an agent.

After unveiling major announcements, towards the end of 2019, about the future of blockchain technology in China, the Bank of China is set to introduce a tough security token protocol soon. The bank is also seeking to create its cryptocurrency that will be centralized and pegged on the Chinese RenMinBi (RMB).

This has brought hope to blockchain startups in China where Security Token Offering (STO) campaigns were banned almost immediately after the Initial Coin Offering was banned in 2017.

China’s hard stand on Cryptocurrencies

Despite being the country with the most blockchain startups and cryptocurrency adopters worldwide, China has had a hard stand on cryptocurrencies. In 2017, just as cryptocurrencies were making their debut, China banned exchanges, ICOs and STOs making it practically impossible for blockchain startups to raise capital for their projects through fundraising campaigns.

Interestingly, China has also been very hard on the cryptocurrency miners even though the government controls some of the largest cryptocurrency mining rigs/facilities.

The turnaround

It appears Chinese officials, especially at the Bank of China, have finally realized that blockchain technology is here to stay.

China outlined its new strategy on cryptocurrencies and blockchain technology through Weimin Guo, the Chief Scientist at the Bank of China, in a Finance Technology Summit held towards the end of 2019.

Among those new strategies is the intention of China to release its cryptocurrency that shall be called China’s Digital Currency Electronic Payment (DCEP). The DCEP shall be a stablecoin pegged on the Chinese RenMinBi (RMB).

According to the DCEP developers, the introduction of the digital coin will streamline the obsolete traditional financial practices currently in use. They also anticipate that the digital coin will rival Bitcoin, one of the most adopted cryptocurrencies in the world.

According to Weimin Guo, Bitcoin failed in its purpose to provide a better financial market compared to avoid the manipulations of the traditional markets.

Proposed strict regulations on STOs

As China loosens its stand on cryptocurrencies and blockchain technology, it still wants to ensure that the technology is kept in check.

Among some of the strict regulations that China seeks to introduce is the tough security token protocol that will see all Security Token Offerings (STOs) operate within an austere “regulatory sandbox mechanism”. By giving STOs a leeway, the country seeks to promote blockchain technology innovations as it maintains complete control of the sector.

However, as China inches back into the game, it is interesting to see how the Chinese regulators continue to embrace blockchain technology. The country seems to be realizing that times are changing and changing fast. Regulators seem to have realized that the country has to embrace blockchain technology or get left behind as the completion across the world hits up. Other countries are doing all they can to ensure that they conform to the technology by introducing laws and regulations to govern it.

Security Token Offering (STO) has become one of the most appreciated methods of raising funds for blockchain projects and startups. However, it is strictly regulated since it falls under financial securities. Therefore, any person, company or organization thinking of conducting an STO in any part of the world must first be aware of the regulations they need to adhere to.

The regulatory requirements set for STOs are primarily set to educate and protect investors.

Due to the seriousness and complexities involved in most regulations, individuals, firms or companies looking to tokenize their assets or equity for sale to investors through STOs are advised to hire an STO advisor like Gravitas international to develop successful strategies and identify the various regulatory requirements for the specific region they want to operate in.

It is worth noting that different countries have different rules for STOs.

In this article, we shall look at STOs rules and regulations in some of the counties around the world where STOs have gathered momentum over the past few years.

1. STOs regulation in the USA

In the United States of America, digital currencies are regulated by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)

The CFTC in 2015 classified cryptocurrencies as commodities, which meant they were to be included under the Commodity Exchange Act.

SEC, on the other hand, has set in place several rules meant to deal with anti-fraud, and registration issues of digital currencies. Through the Howey Test, the SEC can tell if the token used to raise funds falls under securities.

There are three types of regulations that any STO issuer eyeing the USA market should be conversant with. These are Regulation D, Regulation A+, and Regulation S.

  • Regulation D

This specifies how some certain token offerings can avoid the SEC registration after filling a form known as “Form D” once the securities are sold.

The issuers, however, must stick to Rule 504, Rule 506 (b), and Rule 506 (c).

Rule 504 does not set any limitations to investors while Rule 506 (b) and Rule 506 (c) allow accredited investors in the US to take part but does not put any limit on the fundraising.

This regulation, however, has limitations on resale.

This regulation also allows the STO issuers to advertise their projects.

  • Regulation A+

STO issuers who want permission to issue SEC approved securities to non- accredited investors should work under this regulation. However, the regulation states that the maximum amount of investment by investors cannot exceed $50 million.

This regulation does not have any resale limitations.

However, it is more expensive and takes more time to register with this regulation.

  • Regulation S

This regulation shed light on how the securities act registration for security offering that shall take place outside the US should be carried out.

Whenever a security offering is being carried out outside the US, the issuer must follow the security regulations of the respective countries where the offering is being carried out.

This regulation comprises of Rule 901, Rule 902, Rule 903, Rule 904, and Rule 905 of the 1993 Act.

2. STOs Regulation in Europe

In Europe, STO issuers must create a prospect and also meet the security regulation of their respective local regulatory authorities. However, there are some exemptions for the European Union, which include:

  • The qualified investors’ exemption – STO issuers can freely request accredited investors to invest.
  • The limited network exemption – STO issuers can sell their securities to 150 people in any European member state freely.
  • The large investment exemption.
  • The nominal value exemption- if the value of each of the securities is worth 100,000 euros, then issuers can sell the securities without any need for registration.
  • The limited amount exemption – issuers can sell securities of up to 5 million euros without the need for a prospectus.

Regulation of STOs in France

In France, any activities involving financial instruments must be regulated.

The French Treasury came up with a new legislative framework for token issuance after the Financial Markets Authority identified that lack of ICO regulations was a risk.

This was added to the Title V of the French Monetary and Financial Code (CMF) as a new chapter titled “Intermediaries in Miscellaneous Property and Token Issuers.”

The second chapter of the Title V gives the specifications of the tokens that can be registered, or transferred. As a token issuer in France, you must conform to the requirements and conditions under article L. 550-8.

Regulation of STOs in Switzerland

In Switzerland, token issuers must ensure that their tokens comply with Swiss laws. The Financial Market Supervisory Authority ensures that it examines every token sale.

But, in a nutshell, Switzerland is considered to be one of the friendliest states when it comes to token issuance.

STOs regulation in Malta

STO issuers in Malta should ensure that they comply with the Malta Digital Innovation Authority Act, Innovative Technological Arrangement and Services Act and the Virtual Financial Asset Act.

Authorities in Malta are required to first look into the technology behind any project to deduce if it is feasible or not.

3. STOs Regulation in Asia

Asia has grown to become one of the best places for blockchain and cryptocurrency startups.

STOs regulation in Singapore

In Singapore, any STO issuer must first submit a prospectus and register with the Monetary Authority of Singapore (MAS) unless they qualify for the exemptions in the “A Guide to Digital Token Offerings”.

The MAS is mandated to regulate digital token issuance that falls under the capital market products under the Securities and Futures Act (SFA). To determine if the token issuance falls under the capital markets, MAS examines the structure and characteristics of the digital token.

STOs regulation in South Korea

In 2017, the Financial Services Commission in South Korea announced that token sales are illegal in South Korea.

STOs regulation in China

China was the first to ban the sale of tokens in its country in 2017 before South Korea followed suit.

Nevertheless, we could see an ease on the STO stand by the Chinese authorities in future when they come up with STO regulations.

4. STOs Regulation in the Middle East

In the Middle East, the two most countries of interest are Israel and the United Arab Emirates.

STOs regulation in Israel

After forming a committee in 2017 to examine if the Israeli securities laws were applicable in tokens sales, the Israel Securities Authority (ISA) planned to be evaluating token sales on a case by case basis.

According to the ISA, security tokens are cryptocurrencies thus giving the holder of the token entity to the cash flows and ownership rights in the future.

STOs regulation in the United Arab Emirates

UAE Securities and Commodities Regulator plans to recognize tokens as securities, which are governed by the Dubai International Financial Services Authority (DFSA) in Dubai and Abu Dhabi Global Market’s Financial Services Regulatory Authority (FSRA) in Abu Dhabi.

Security Token Offering (STO) is slowly becoming a darling among technocrats, especially those involved in raising funds for blockchain projects. STOs are usually strictly regulated by federal regulations making them one of the best and most secure forms for raising funds. However, due to the strict regulations that the STO tokens must comply with, special standards are required to make them comply with the regulations.

The common ERC-20 standard is not sufficient for creating STO tokens. Therefore, companies and organizations had to come up with more advanced standards with an additional layer for regulations compliance. In addition to complying with the set regulations, the additional layer also helps in identifying who interact, purchase or even trade the STO token.

Available token standards for creating STO tokens

  1. ST-20

This security token standard was developed by a company known as Polymath. It is a smart contract that defines a set of rules, including who can interact with the security token and how they should interact.

Polymath, the company behind this standard, provides a set of pre-programmed regulatory modules that developers can use when creating a security token using the standard.

  1. R-Token

This standard uses a combination of three smart contracts, namely A, B, and C. The three smart contracts are interlinked in a way that they can associate. Smart contract A contains ERC-20 standards. Smart contract B contains the rules on who can interact with the STO token and how they should interact. Smart contract C dictates who can communicate with the token and how they should communicate.

  1. ERC-1404

This is a special standard, developed by Tokensoft. The standard enables tokens that are built using different standards, including R-Token and ST-20, to be interoperable with different cryptocurrency wallets and exchanges.

  1. ERC-1400

This standard was developed by ERC-20 and ST-20 developers. The standard is designed to incorporate gatekeeper access control, redemption semantics or issuance, error signaling, and differentiated ownership.

For non-fungible tokens, this standard is backward compatible with the ERC-777 standard.

The tokens offered in a Security Token Offering (STO) are called security tokens. They are basically crypto tokens that pass the Howey Test.

Just as the name suggests, security tokens are grouped as securities and are therefore subject to the federal securities regulations. This is why STO is said to be the most regulated method of raising funds for blockchain projects, compared to other means like ICO and IEO.

Security tokens are developed in a special way because they require an additional layer in their smart contract to make them regulatory compliant. This additional layer helps in identifying who is allowed to purchase, trade and interact using the token. That is why Security tokens are not developed using common ERC-20 standards. The ERC-20 standards lack the crucial layer that makes security tokens to comply with regulations.

Therefore, a number of companies and organizations have come up with different standards to help in creating security tokens. One of those companies is Polymath, which has gained lots of popularity since its launch a few years ago.

Polymath security token standard

Polymath designed a security token standard referred to as ST-20, which defines a number of rules for Security tokens. For instance, ST-20 tokens define who can use the token and how the token should be used within the smart contract.

 Creating a Security Token for your blockchain project using Polymath

Below is a step by step guide on how you can develop a security token for your security token.

  1. Create a funded Metamask account

To create a Metamask account, you download the Metamask chrome extension and then fund the account using Ethereum (ETH).

Metamask is an API that allows you to access Ethereum enabled Dapps using your browser. It is simply an Ethereum wallet.

Then, open the Polymath website and click on the ‘Configure Your Security Token’ so that you can start creating your security token.

Note: You cannot proceed without first downloading the Metamask plugin on your browser. If you try clicking on the ‘Configure You Security Token’ button without first downloading the Metamask, you shall be directed to the page below. However, you don’t have to worry, just click on the Metamask link on the page to download and install the Metamask.

  1. Create a Polymath account

When you click the ‘Configure Your Security Token’ button, you will be directed to the registration page where you will be required to fill in your name and preferred email address.

When you click on ‘Create Account’, you shall be required to sign in with Metamask also. This is done so as to sign your email address with your Metamask wallet.

  1. Choose your Token name, symbol and register it

After completing the registration process in Polymath, the next step is registering your security token. You will have to choose a name and abbreviation (better referred to as token symbol).

When choosing the name of your security token, it is advisable to choose a name that is in line with the name of your blockchain project.

An example of a security token name can be ‘Transporty’ with a symbol ‘TRP’.

You have to ensure that the name and symbol that you choose is not used by any other blockchain/cryptocurrency project anywhere in the world.

Once you click on the ‘Reserve Token Symbol’ button, you are given a 15-days window where you can consult with your team members and advisors before submitting the symbol name and symbol for approval.

Once you submit the name and symbol, you get a confirmation email to contain the full information about your security token.

  1. Choosing your partners

The next step is usually selecting the people that you want to help you with your STO. Here you choose the KYC/AML providers, legal team, advisory team, and marketing team.

It is, however, important to note that the portal doesn’t directly contact the selected persons or organization. It only sends you an email containing a sample of the email you would send to them.

Once you are done with selecting all the four teams (Advisory, Legal, KY/AML and Marketing), you go on to create your token.

 

  1. Creating the Token

When creating the security token, you can add a link to a file containing any additional information on the token.

  1. Setting up the details of the STO offering

Here, you are supposed to choose the currency that you want the investors to use when purchasing your security tokens.

When you click on the ‘Select And Configure STO’ button, you proceed to configure all the important aspects like the start and end date, the hard cap, the amount to be raised, and etc. of the STO.

Once you complete the process an email address containing the details of the STO configuration is sent to your email address.

  1. Whitelisting investors

The last step is whitelisting your investors. This enables the investors to buy your security token in the future. Since STOs are highly regulated, it is important to know who holds the securities.

However, the whitelist can be changed during the STO. You can add new investors along the way as the STO continues to allow them to purchase the security tokens of your STO.

Due to the additional layer of standards required for the security tokens so that they can comply with security regulations, STO requires more advanced standards when it comes to their creation. STO security tokens are not created using the ERC-20 standards as most ICO and IEO are.

To cater for the additional regulatory layer, there are a number of companies and organizations that have come up with platforms where STO issuers can create their security tokens with ease.

Below are some of the best platforms for creating your STO’s security tokens:

  1. Polymath

Polymath allows security token issuers to create tokens using the ST-20 standards which were designed by Polymath.  It works similar to the Ethereum network and it has its own crypto token referred to as POLY.

It connects the smart contract developers, advisory experts, legal experts, KYC/AML providers, and token investors.

The process of creating security tokens is quite simple as one does not have to do any programming. You just have to follow through the steps and end up getting a fully functional security token and a configured STO.

  1. Swarm

Swarm uses the SRC20 protocol to create security tokens for real-world assets. In short, the platform allows users to create asset-backed security tokens. Therefore, users can create tokens backed by assets like real estate and so forth.

The Swarm platform also has its own crypto token that can be used for operations within the platform. The Swarm token has a symbol of ‘SWM’.

  1. Harbor

Harbor platform is a special security token creation platform since it allows traditional assets to transform into security tokens. It allows the creation of security tokens backed by real-world assets like real estate, fine arts, etc.

The platform uses a regulated system token referred to as the R-token. The R-token is a token on the Ethereum blockchain that allows the transfer of tokens once an On-chain Regulator Service is approved. The token basically gives permission for transfers.

  1. Securrency

This platform allows the creation of security tokens through a drag and drop process.

Furthermore, the platform allows users to perform Know-Your-Customer (KYC) and Anti-Money- Laundering (AML) verifications over 155 countries on both crypto and fiat transactions.

Users can use the InfinXChange™ APIs to select blockchains of their choice and also get an abstraction layer.

  1. Securitize

This platform manages the entire process of security token creation and issuance throughout the token’s lifetime. It manages the processing of the investors to the received capital.