Which Countries From Around the World are Optimal For a Security Token Offering (STO)?
While ICOs have been a quick and popular method of quickly raising funds for a new blockchain business, their era seems to have come to a quick end. Despite the fact that some of the top coins that people are investing in today originally started as ICOs, the popularity of Initial Coin Offerings has suddenly dropped in 2018.
The problem is that ICOs, no matter how useful they might seem, also come with a lot of problems of their own. One of the top issues is the fact that many of them ended up being scams that robbed people out of their money. Not only that, but a lot of them also turned out to be unsuccessful projects, which also had a negative impact.
With ICOs going away, something else had to emerge, and STOs (Security Token Offerings) started to emerge. STO seems to be a new trend that has yet to have its big boom, and since it is a more tangible method of raising funds, experts believe that its time has yet to properly arrive.
However, to understand what STOs are, we should first understand one very important thing about security tokens. That is the fact that security tokens are actually backed by real assets, things that have their established value. This ensures that security tokens can keep their price, and companies can use them to represent shares of their stock. That way, those that hold security tokens are entitled to ownership rights. Because of that, security tokens are among the most regulated digital assets in the world.
The Best Locations For Launching STOs
Clearly, in order for STOs to succeed, just like ICOs before them, they have to take numerous factors into consideration. One of the biggest ones includes location. This is only natural, as every legal jurisdiction has its own rules and laws. In an ideal situation, you would want to launch an STO in a legal jurisdiction that has legal certainty on STOs. It would also help if said jurisdiction has a good reputation.
Most of them have laws that aim to prevent fraud, but this doesn't mean that STOs have full regulatory certainty in such locations. Now, let's take a look at some of the best legal jurisdictions for launching STOs.
Lithuania is well on its way of becoming a fintech hub in Europe, and one look at its security token regulations immediately shows that there was a lot of thought put into it. The country's Ministry of Finance has created a special task force that has made multi-institutional explanations regarding taxation, accounting, and issuance of security tokens. Best of all, it is all in compliance with the EU's financial market rules.
As a result, people can now issue STOs in a state that is a member of the EU, which will open their way to all other EU countries. Lithuania even allows you to get a professional opinion from financial market supervisors regarding the nature of your STO, and whether or not it has the necessary features of a security token, for free.
Of course, Switzerland would have to be on this list. This is a country that has always been a haven for all types of finance-related businesses. The country has a Financial Market Supervisory Authority, also known as FINMA, which is known for supporting new technologies and innovation. However, blockchain technology is still not being held in the high regard in Switzerland.
In their guidelines for ICOs, Swiss regulators stated that financial market laws will also fully include security tokens. Similarly to Lithuania, Switzerland also allows you to request an opinion regarding your ICO, and whether or not it has features of a securities offering. However, unlike Lithuania, the process is quite costly, and it often takes months to get a reply.
France is a country that is still trying to get to a place where Lithuania and Switzerland are already at. Recently, in late September 2018, the lower house of the French parliament started a debate regarding a new legal framework for STOs and crypto assets, in general. The plan is to start issuing non-binding certificates for compliant ICOs. However, Switzerland and Lithuania are already offering such documents, making it an old idea. Even so, many are glad to see France making this kind of progress, and it definitely places it on the list of good STO legal jurisdictions.
Israel has grown to be known as one of few ICO havens around the world, mostly because this country has a lot of respect and support for blockchain technology. The country's regulator is a body specially created for regulating cryptocurrencies. So far, this committee was not very restrictive.
In addition, the country's Securities Authority issued a new report recently, in which they made a clear difference between security tokens and utility tokens. One potential issue is a lack of clarity on several issues, such as STO taxation, accounting, and alike.