How to manage payment methods during an STO

For a Security Token Offering the issuer may want to have the ability to accept multiple forms of payment.

Payments can be transferred in both fiat or crypto currencies and the issuer should be able to accept bank transfers in several currencies. Specific payment providers can be used as well (bank card, Paypal, etc.) but it will cause additional fees for the issuer. For payments in crypto, smart contracts or dedicated wallet systems can be set up.

Of course, Anti Money Laundering (AML) procedures are necessary. When conducting AML procedures you may go through international watch-lists for companies or persons who are believed to be risky. It is also possible to get risk scores for Ethereum addresses to help curb money laundering risks through the Ethereum blockchain. The key issue in the AML process is to be able to show the provenance of funds by using proper bank controls for fiat currencies and dedicated solutions for receiving crypto-payments and even having investors submit declarations of the source of funds in some instances.

The security token issuer carries the responsibility to comply with all KYC and AML procedures. Companies can choose to process the KYC and AML checks internally or via an external agent who is well versed and qualified to run all the proper procedures. By using KYC and AML technical solutions it is possible to automate part of the process and plug in all of the KYC requirements into your offering funnel.

Here is a list of payments accepted and requirements for each method:

Payment methods

Fiat payment methods:

  • Bank transfer
  • Bank card
  • Bank check

Ethereum payment methods:

  • To a smart contract
  • To the issuer wallet
  • To the custodian or escrow agent wallet

Bitcoin payments:

  • To the issuer wallet
  • To the custodian or escrow agent wallet