Overview
Security tokens are digital representations of traditional financial assets, such as stocks, bonds, real estate, or commodities. Because they represent an investment with the expectation of profit, they are subject to strict regulatory oversight by bodies like the SEC.
Key Features
- Asset-Backed: Value is derived from an external, tradable asset.
- Regulated: Must comply with securities laws (KYC/AML requirements).
- Programmable Rights: Dividends or voting rights can be automated via smart contracts.
Significance
Security tokens aim to bring the efficiency and transparency of blockchain to traditional finance (TradFi) through tokenization.