Most experts in the crypto market agree that Security Tokens are the new trend in the blockchain industry and Security Token Offerings (STOs) will soon be met with great enthusiasm at a global level. Countries around Europe have started on developing legal infrastructures that ensure the European-based startups remain competitive in the crypto space.
Being considered “transferable securities”, security tokens are currently regulated under European Law by the Directive 2014/65/EU of the European Parliament, the primary part of legislation governing the issuance and trading of securities in the EU. This directive, along with other laws, are in the process of being integrated, consolidated and unified across Europe. The most important piece of legislation planned to be released in July 2019 is the so-called “Prospectus Regulation”, that will rule over the companies that want to issue and offer transferable securities.
With the first European public STO held in September 2018 in Liechtenstein and laws being different from country to country, the need for a unifying regulation at European level was obvious. Considering the fact that the securities market is already well established and governed, trading securities across the European Union or the European Economic Area is relatively easy. Trading security tokens is currently possible, but the legal framework still needs a lot of improvements. In order to trade security tokens through an exchange requires the procurement of a license. The most common one is a Multilateral Trading Facility (MTF) license that can be claimed by any type of investment company.
In conclusion, anything considered security nowadays (such as shares, stocks and so on) can and will be tokenized (the process of introducing securities on a blockchain, becoming asset-backed tokens), and for that reason the potential of security token offerings is enormous. As Diana Stetiu, Senior Associate at Bulboaca&Asociatii mentioned in an interview for CCN.com, “All regulatory authorities should be aware that the biggest risk is not the lack of regulation, but rather overregulation or bad regulation which may kill the development of revolutionary products”.