Standard Protocol for STO

Governments in many countries have begun to break the ICO funding to save investors against damages. They also realistically license the STO as an alternative to the ICO. This direction is led by the US SEC and is supported by the 100-year history of the US securities system.

The keypoint is that the token issuer may issue and distribute tokens that are recognized as securities within the regulated sphere of government control. If the token issuer wants to get out of this regulation, it will have to prove that the token is utility token at least .

From a business perspective, it may be easier to comply with STO regulations and expand the project within the legal framework than to forcefully prove utility tokens.

However, this environment is nothing new in the real estate realm, where businesses have only been able to do business in compliance with government regulations and legal processes. For this reason, it may be natural that STO have the least objection to regulations and are quick to adapt in real estate area.

The ERC-20 is actually the most popular one among the Ethereum-based token protocols that implement smart contracts. It was used for standard of many token projects, and helped the
Ethereum being the method of the ICO in the crypto market.

However, the features of the ERC-20 did not match the securities tokens that required identity verification, such as KYC / AML. Proof of identity is required to proceed with the STO, but since the ERC-20 did not support it on its own, each STO platform introduced a new token standard for the STO. The most representative is ST-20 standard of Polymath platform.

For example, there is a function that recognizes a list of legally troubled tokens and cannot trade tokens with addresses that are not on this list. This is possible because of the technical basis for adding methods to verify that both the sender and receiver involved in the token transfer are qualified.

The nature of STO is to lead the way of standards that can realize complex interactions between on-chain and off-chain. To date, the ERC-1400 is the most active, but the results will be further watched. Until then, the standard of token proposed by each STO platform seems to play a practical role.