The corporate law and decentralized finance lawyers at VIOTTA have extensive experience in assisting companies with a traditional IPO and debt capital market transactions, such as the issuance of bonds (high yield debt or investment grade debt). If such transactions have an international character, VIOTTA’s lawyers work closely with foreign law firms.
Security Token Offering (STO)
A new and alternative form of raising money through the issuance of debt or shares (equity) is a so-called Security Token Offering (STO). Funding is raised through a presale of tokens created on a blockchain. These tokens can be based on stocks, bonds, a mutual fund share, futures contracts or swap contracts.
Legal challenges
- Do Security Tokens qualify as a financial instrument?
- Do Security Tokens fall under the definition of security under the Financial Supervision Act?
- Under what circumstances is the issuance of a prospectus required and are the requirements of the prospectus applicable to the STO?
- How long does it take for a prospectus to be approved and do KYC and Anti-Money Laundering AMLD5 rules apply?
The Financial Supervision Act currently has no specific regulations for STOs. The AFM takes a technologically neutral position with regard to regulating security tokens. The Netherlands Authority for the Financial Markets (AFM) assesses on a case-by-case basis whether a security token qualifies as a financial instrument.
Some aspects of STO in the Netherlands
- The issued tokens representing securities are issued by start-ups, SMEs, large corporations and listed companies.
- Direct participation is possible by investing fiat currencies or cryptocurrencies.
- Possible documentation requirements include a prospectus, filing, and regulatory registration.
- Investors’ rights are generally voting rights and/or dividends
Need advice on the possibilities for your company to raise alternative financing through a Security Token Offering (STO)? VIOTTA is happy to help
Raising funding through an STO has significant differences compared to traditional ways of raising money and offers multiple benefits, such as the immediate global reach of the digital distribution of tokens and the fast turnaround time for raising funding. Building a legal bridge between assets and distributed ledger technology on the blockchain requires the deployment of multidisciplinary lawyers with specialist knowledge of this very rapidly developing field of law. If you have any questions, do not hesitate to contact us.
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