When it comes to the world of cryptocurrency and blockchain, Uzbekistan flies under the radar. Yet, when you take a deeper look at the nation, it soon becomes clear that it’s steeped in a crypto fever and is pushing its hardest to become a fully-fledged crypto nation. In fact, Uzbekistan is looking to regulate security token offerings (STOs) and become a haven for any blockchain project looking to host an STO – something that not many other jurisdictions are actively looking to pursue.
STOs to Become the Future of Funding
While initial coin offerings (ICOs) were all the rage in 2017, many of them let investors down due to being scam operations and started giving the practice a bad name. While many countries are looking to regulate ICOs in a bid to stamp out scammers, not many nations are turning their attention to STOs. Interestingly, STOs are rather similar to a traditional initial public offering (IPO) that you would find a stock exchange.
The two pivotal differences between an STO and an IPO are accessibility and speed. An STO is available to anyone around the globe – no matter who you are – and an STO can be executed in just a handful of months rather than the years an IPO can take. These characteristics are making STOs increasingly popular with firms around the world, and 2019 looks set to become the year of the STO in many ways.
The Pitfalls of STOs
Unfortunately, STOs do have some major pitfalls – the main one being they are sparsely regulated. This in effect creates a similar arena that the ICOs played in back in 2017 – which is why this move from Uzbekistan to regulate the space is so important. Companies that would never manage to raise funds under an IPO are looking to squeeze funds from less scrupulous investors through an ICO or STO – Palladium is a great example of this. It created its own type of token – initial convertible coin offering (ICCO) – to allow investors to trade their tokens into shares at a later date.
Innovative but Controversial
While this sounds cool and innovative, it begs the question as to why not just offer shares upfront. The owner of Palladium appears to be desperate to get his hands on a bank, and is using his new-fangled ICCO to raise the funds to achieve his lifelong ambition. This is a huge pitfall that STOs will likely fall into, unless regulations are put in place that require companies to offer key investor information documentation (KIID) and complete background checks.
Uzbekistan has invested millions into developing a technological park with all the bells and whistles to attract firms looking to launch a regulated STO. On top of this, it has also developed a fund to help companies seek advice, funding, and regulation – all with the goal of making Uzbekistan the STO capital of the world. It’s time to stop ignoring Uzbekistan and looking seriously at what it’s trying to achieve in the STO space.
