Choosing the right issuance platform is a crucial step in the STO process. Issuers need to understand the requirements of their tokens and identify the best fit.
Security token issuance platforms are an essential part of the STO ecosystem. They provide the technical and legal support structure for the issuance, including KYC and AML compliance, token setup and deployment services.
Once the STO is live, investors simply log into the platform and access all information relevant to the offering. The issuance platform then leads the investor through the entire process from investor onboarding and payment of funds, to receiving their tokens.
How to choose the right platform
Choosing the right provider is a crucial step during the STO setup process. There are numerous platforms that all look as if they offer the same services. However, taking a closer look is necessary, because features can differ significantly.
When choosing the platform, issuers need to compare the specific requirements of their tokens with the services offered on the platform. Not every provider supports every blockchain. Thus, compatibility is the first consideration. Some platforms can conduct worldwide KYC checks; others are locally limited. Some offer a wide range of token customization features, while others have tight restrictions.
Ideally, an issuer should be able to manage the entire lifecycle via one compliance provider; not only the issuance but also everything that comes afterward, for example, investor management, dividends issuances, and secondary listings.
That said, while it’s great if an issuer can work with the same service provider throughout the entire lifecycle, from the start until the end, it’s good to remain flexible. There might be problems coming up during the process, which can quickly lead to frustration.
Thus, issuers need to ensure that their token will still work as desired in case they change the provider. If it doesn’t, it might be better to choose another platform. The STO market is still young, and it’s likely that things won’t always work out as planned.
Our top 7 platform picks
There are numerous platforms out there; the below candidates are some of the most popular:
Polymath is one of the strongest brands on the market, with a team of accomplished blockchain developers and high profile advisors. The Polymath Token Studio enables issuers to create a security token in just 10 minutes. Users can customize and launch their tokens and select from a range of different KYC/AML providers and partners.
Polymath uses their native smart contracts and their native ERC-20 token POLY for fees and payments on the platform. A downside of Polymath is that it does not support cross-blockchain transactions; it functions only on the Ethereum network.
Locations: USA, Abu Dhabi
Securrency is a one-stop security token issuance service. The platform offers the entire range of services needed for the issuance and beyond, including KYC, post-issuance token support, and full interoperability of tokens for cryptocurrency exchanges.
The core strength of the Securrency platform is interoperability. Tokens launched on Securrency can be transferred across most of the popular blockchain networks. The platform also integrates with traditional legacy financial services to provide liquidity.
Issuers can embed investor management applications to manage their investor relations without having to rely on platform-external applications. For token distribution, issuers can leverage the RegTex engine that can conduct KYC checks in more than 160 countries.
Securrency uses the CAT-20 and CAT-721 token standards, which are both based on centralized rules engines. Issuers will have to pay for the enrollment and the initial tokenization. There is also an annual maintenance fee and charges for on-platform customizations and the use of applications.
Securitize launched the DS (Digital Securities) protocol, which creates DS tokens that operate on the ERC-20 token standard. Hence, the platform is designed for Ethereum-based tokens. Securitize includes a registry listing investor information and KYC details and a compliance layer for securities laws and regulations of specific countries.
Securitize is one of the most popular platforms and has already issued more than 4 billion tokens. Issuers will have to pay upfront fees and monthly recurring fees, with the initial contract being a 2-year contract.
Compared to other platforms, TokenSoft has more customization functionalities built into its processes. It offers a wide range of issuance customization features, token distribution support, payment of dividends, digital assets custody, and token trading via open-architecture token issuance and design features. Issuers have so far raised more than $400 million via the platform.
TokenSoft offers KYC/AML compliance in more than 50 jurisdictions and uses the ERC-1404 standard, which is compatible with a range of other standards, for example, Polymath’s ST-20 OR Harbor’s R-Token. The platform supports Ethereum, Stellar, Corda and Hyperledger. It employs an SaaS-pricing model, charging a monthly fee for post-sale management and additional fees for custody solutions.
Harbor is an all-in-one platform for all kinds of digital securities but is particularly popular for the tokenization of commercial real estate. It offers the full range of issuance services such as KYC/AML, investor accreditation, tax forms, document signing, funding, wallet provisioning, and custody through integration with BitGo. The platform uses an ERC-20 token called R-token which is built around Ethereum and is a permissioned token, meaning it is partially centralized. The pricing structure depends on the project size.
Swarm uses the SRC20 protocol and focuses on real-world asset tokenization, such as real estate, renewable energy, agriculture, and technology assets. The platform uses a straightforward 4-step process that accompanies users from the definition of fundraising rules to the release of funds. The protocol establishes a specific set of rules which tokens have to adhere to in order to represent a real-world asset.
Developers can also use the protocol to build their own applications on the platform. Swarm uses the Market Access Protocol (MAP) to ensure interoperability between issuers, investors, exchanges, and KYC/AML providers. The network is decentralized and is operated by a global community of Swarm Masternodes, whose owners earn rewards for powering the network.
Tokeny operates the T-REX (Tokens for Regulated Exchanges) standard which allows for the compliant transfer of ownership and enables issuers to manage their securities, for example by paying and receiving dividends. Tokeny has just recently launched InvestorID, a platform-integrated whitelisting application that allows investors to verify their identity once and then reuse it for any STO conducted on the platform.
Before you go…
These are just some of the many platforms out there. Consider this a starting point for your research. If those platforms don’t provide what you’re looking for, keep screening the market for the best fit.