7.1 What Is an STO?
A Security Token Offering arises when the tokenised instrument legally qualifies as a security. “Being a token” does not by itself change the legal classification. Classification follows the actual rights and economics (Howey Test or local equivalent).
In the United States, the SEC stated in 2025 that tokenised securities remain securities. In 2026 it further differentiated tokenised securities structures and discussed holder rights, custody and direct/indirect models.
7.2 Full Financing Cycle
Issuer → Legal Structuring → Disclosure → Investor Onboarding (KYC/AML)
→ Primary Issuance → Secondary Trading → Corporate Actions → Redemption
The potential advantage of an STO is programmability applied to the financing process. However, a secondary market is not created merely by issuing a token. A licensed venue, real liquidity (market maker), market surveillance and transfer rules are required.
Practical note: Many projects face thin secondary markets after primary issuance. Liquidity design and transfer restrictions must be part of the business model from day one.
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