Securitized token offerings (STOs) are the new trend in the cryptocurrency sector being looked at by institutional investors as a feasible way of raising funds. Nevertheless, there are a totally dissimilar piece of regulations in various countries and continents to be put into consideration before rolling out an STO. For instance, the environment for STOs in Europe is more friendly than that in the United States of America under the US Securities and Exchange Commission (SEC). Let’s look at an expert guide to roll out a fruitful STO in Europe.
Within the EU, the agency in authority of securities regulation including STOs is called ESMA - European Securities & Markets Authority. ESMA has tried to produce proper guidance for both retail and institutional investors and for other potential businesses.
There are many important pieces of ESMA legislation about STOs that must be looked at properly. For instance, there is the Prospectus Directive which says that enough data must be given to investors before the sale of securities in any part of the country with European Union. This helps investor to make a comprehensive decision, for instance, shareholding structure, business data, financial shareholdings, etc. before making any investment.
However, besides the ESMA, the rules and regulations from other financial guidelines such as MiFID, AIFMD, Fifth AML Directive, must be fully complied with. Most of these piece of legislations aims at reducing or stopping malevolent money sources and other illegal activities associated with cryptocurrencies such as money laundering, drug trading, funding terrorism, etc.
However, there are many other non EU countries including Liechtenstein that do meet the terms of the EU regulations governing STOs. Actually, a good number of European countries such as Malta, UK, Gibraltar, etc. have friendly regulations for cryptocurrency, DLT dealings and STOs. So, it is better for investors to err on the side of restraint of each governing authority of individual countries.
So far, the EU looks like the friendliest market for both initial coin offerings and token offerings, and the ESMA is going to continue accelerating and easing the processes to encourage and attract more institutional investors into this lucrative industry. Significant progress on securities at the EU level is highly expected.