Security Token Offerings (STOs) and Real-World Assets (RWAs) involve asset tokenization on blockchains but differ in nature and regulation.
- STO: Represents securities (e.g., stocks, bonds), subject to strict securities laws and KYC/AML requirements, used for company or project financing. STO tokens, akin to traditional stock certificates, are recorded on the blockchain, offering transparency and security.
- RWA: Includes non-security assets (e.g., gold, art, real estate), with regulations varying by asset type, aimed at improving liquidity and fractional ownership. RWA tokenization makes high-value assets more accessible, such as buying art shares via blockchain.
STOs offer regulated investment avenues, suitable for institutional investors; RWAs democratize asset access, appealing to retail investors. STOs face complex compliance requirements, while RWAs involve challenges in asset valuation and custody. According to BCG, the RWA tokenization market is projected to reach $16 trillion by 2030. Both drive the convergence of traditional finance and blockchain, potentially reshaping financial markets.
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