The 2018 crypto bear market and the supposed death of initial coin offering (ICOs) have seen the rise of security token offerings (STOs), get touted as “the next hot crypto thing.” Major players include Polymath and Tezos.

Regulatory scrutiny is forcing token issuers to register their coin offerings as securities, and a growing number are “playing by the rules.”

But there’s something else going on within the STO industry: startups are not only marketing their tokens as “securities” but are also targeting only wealthy investors.

STO investments are much like cryptocurrencies, except for the fact that the value of cryptocurrencies like bitcoin is dependent on what market is willing to pay and thus subject to wild volatility.

On the contrary, security tokens are tied to actual assets like company shares, real estate, or debt and investors sometimes get paid dividends.

Security tokens are also subject to securities laws, whose provisions mean issuance is limited to accredited investors. An individual interested in a security token must certify that they are of a certain financial status before they proceed to invest in the STO.

By complying with the Securities Act of 1933, STOs generally avoid the grueling registration that initial public offerings face. More importantly, though, the project ensures that it doesn’t flaunt SEC rules that are designed to protect the average investor.

Bloomberg reports that a total of 27 STOs were organized between 2017 and 2018. Of these, 25 were held last year, and projections suggest about 87 will be rolled out this year.

The numbers, however, pale in comparison to the ICO boom that saw hundreds of projects launch token sales last year alone.

ICOs were big last year, with token sale tracker Coinschedule.com showing that together projects raised over $19 billion from token sales in the last twelve months, one of which was the $1.7 billion Telegram ICO.

But ICO projects saw massive losses in 2018, a majority of tokens losing as much as 90 percent of their value and investors recoiling at the enormous losses. That wasn’t all for initial coin offerings; the U.S. Securities and Exchange Commission (SEC) swooped.

The SEC charged ICO organizers and reached settlements that included asking projects to refund investors and register as securities. Even promoters, including celebrities like Floyd Mayweather and DJ Khaled, were not spared.

The ICO fire isn’t as hot as it was last year, and digital securities are the ‘in-thing.’ U.K.-based firm CoinShares released a report last November stating that the tokenization wave would catalyze growth in the STO market as well as in the overall crypto industry.

However, investors need to approach the sector with the same caution they would when making a new investment.

As with any other emerging industry, risks still abound, and some tokens would end up as lofty schemes that leave investors holding worthless coins.

Most of the top cryptocurrency exchanges do not offer support for STOs yet. Nonetheless, the growing popularity of these tokens has stirred the market, leading to the development of new security token platforms like Overstock’s tZero, Polymath, and Securitize.

Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies