The benefits of security tokens (also known as “digital securities,” “smart securities” or “programmable securities”) for issuers and investors have been written about at length. However, the benefits described often confuse the benefits of crowdfunding and other existing market dynamics with those of security tokens. In this article, we will attempt to provide clarity around the benefits of security tokens issued by private companies relative to the current market for private securities and misconceptions around security tokens.
#1: Security tokens give access to a global pool of capital. Access to capital from around the world was available for a long time before security tokens. As remains the case with sales of security tokens, investment documents are prepared and circulated to investors who sign them electronically. Laws are what permit more or less access to global capital and determine from which jurisdictions around the world issuers can raise capital. U.S. companies have been able to raise capital globally under Regulation S for decades. Most non-U.S. jurisdictions have similar laws that permit (or do not prohibit) capital to be raised globally. The sale of security tokens has not extended the reach of companies to raise capital outside of the jurisdiction of their incorporation.