Guide to legal process to issue the secure token (STOs)

ICO is currently developing towards STO, and this is a comprehensive guide explaining the legal process for issuing a security token.

STO (Security Token) is not just a compelling phrase. It reflects the movement of the ICO in the world as legally free because it must comply with well-established and enforced laws and regulations. The reason is that the managers’ awareness of the ICO as a loophole in the legal field raised funds and their desire to seal it, to protect investors and consumers.

More and more regulators, including the Securities and Exchange Commission (SEC), the Financial Market Authority of Switzerland (FINMA) and other European and Asian regulators Assume that the token vendor is selling tokens for an inactive platform. Then these tokens can be bought by the crowd as an investment and therefore, should be regulated.

You should keep in mind that tokens can trigger all types of licensing requests in addition to compliance with securities laws. For example, a token that is not a security may still be considered electronic money, a payment service, or an alternative investment. The general rule is: conduct a legal analysis of your token and if the conclusion is that the securities procedure or other licensing process is necessary, select the country where you want to start according to the intended target market. mine. Then, the jurisdiction to license and the securities law are always determined by the source of your customer.

The European Union has regulated the issue of EU-based securities through a prospectus and prospectus. EU directives are implemented internally by state regulators, which provide country-specific rules, based on directives, but this concept is similar and the idea is to have a standardized legal framework. for all EU members. Consider the main points of EU regulations that you should know.

The legal process that a securities issuer needs to undergo is without a license, rather than drafting the prospectus and being approved by the regulatory authority in the country of the issuer’s choice. Requesting the prospectus is a rule, some exemptions are exceptions. Exemption means that you are selling the security, but by pre-defined rule, we sell publicly (‘retail’).

Before choosing to go to the stock frame, there are some basic issues to go through, after you’ve chosen your authority:

What makes your token become secure?

The definition of securities is similar in spirit but varies between countries and countries is the details. EU securities are mainly shares of companies (‘equity securities’) or corporate bonds (‘debt securities’), which are negotiable in the capital market; or other securities have the right to buy back such securities or generate cash payments (other than payment instruments). In the United States, the definition is broader and puts more weight on the purpose of investing and what entrepreneurs are doing with investment funds, rather than on the actual tools that investors are getting to redeem. take their money.

Is your token a payment instrument?

To be considered a payment instrument, your token should primarily work as a form of payment, but not a form of obscurity — the token will need to allow the buyer to purchase the token. The product or service actually uses it from the first day. If your token is only a payment instrument, it will not be a securities law, but it can be considered electronic money or payment services.

The main feature other than the uncontrolled payment token from electronic money or payment service is the legal relationship between the coin owner and the issuer. When the issuer is responsible for coin owners, for example, to buy coins, it usually means that licensing is required.

Can you break the law?

If your token is really secure, then the next thing you need to do is check if you can use one of the exemptions. Exemptions are a way for you to offer a security without having to go through the process of compiling the prospectus and complying with the prospectus of the prospectus or other requirements of the local securities law. In short — that’s a very confusing way for you to release and sell the security.

Exempting a qualified investor, private placement and private term has received the interest of recent ICO entrepreneurs. That means that you can sell your security card freely to qualified investors, which means that they are mostly organizations and individuals with high net worth and interests. Well, known is Reg D. Do not forget to write a proper location memo and a strong subscription agreement for the investor. You will most likely be working with investors and companies with ‘experience’, so you need to protect your true interests.
Exemptions — if you are looking to raise less than 5 million euros in your STO, you do not need to outline the prospectus and you may be eligible for a ‘limited offer. ‘
Limited network exemption — In the EU, if you sell a security token of up to 150 people (regardless of whether or not they are eligible) for each member state, you do not have to draft a prospectus.
Nominal Exemption — if each token you sell is at least 100,000 euros.
The big investment — if every investor buys at least 100,000 euros worth of your tokens.
Have you modified your business plan?

You should note that in most cases exceptions, you will not be able to list your token on all exchanges. Obviously, if you are committed to selling only the token to eligible investors or to a limited network, the swap list option is immediately removed from your listing. Even if you have chosen to draft the prospectus and actually sell your security token to the public, the encryption exchanges listed are currently compromised security tokens. So, you need to make sure your business plan is prepared to walk the path less, for example by setting aside the appropriate legal budget and by scanning the exchange in advance will be able to adjust the name list your tokens.

You feel like you do not like it?

You probably feel like you are not ready for the impact or security level processor you do not have enough time. In this case, I recommend sitting with your attorney, applying a flexible approach, and see if you can adjust your token characteristics and choose the right legal area to have. Can not sell the token as a gadget or billing token.

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