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GUIDE STO in the European Union



Well-known member
Aug 9, 2020
A number of countries in the European Union have begun to recognize the existence of an STO (Security Token Offering) as a substitute for an ICO (Initial Coin Offering). ICO is considered inadequate in terms of safety and comfort.
This is what motivates them to start developing STOs. Malta is one of the countries that is very interested in blockchain and has launched their own STO via LXDX (Maltese Cryptocurrency Exchange). Meanwhile, Estonia has also launched their own STO. The steps of the two countries are considered capable of encouraging other countries in the European Union to be more open in conducting STOs.

Regarding STO-related regulations in Europe, it differs depending on each country. In order for an STO to be launched, the organizer of the STO (in this case the company owner or related partner) is required to prepare a prospectus that has been approved by the regulator in their respective country. A prospectus is like a whitepaper that provides detailed information on the project to be used in the STO process.

However, in general, considering that most of them are member countries of the European Union, STO organizers must meet at least one of the requirements set by the European Securities and Markets Authority's Exemption Regulation.

Malta itself has issued special regulations, namely the Virtual Financial Asset Act (VFA Act), the Innovative Technological Arrangement and Services Act (ITAS Act) and the Malta Digital Innovation Authority Act (MDIA), which also contain alloys for STOs.

Meanwhile, Switzerland, which is known as the leading country regarding blockchain, also has its own STO regulations. An authority called The Swiss Financial Supervisory Authority (FINMA) classifies tokens into:
First, Payment Tokens are used to pay for goods and services.
Second, Utility Tokens to access the use of certain digital-based applications or services.
Third, Security Tokens are blockchain-based digital tokens that represent certain assets, both physical and virtual as long as they are considered to have value (securities).
This means that STOs in Switzerland are governed by the same rules as securities in general, such as stocks, bonds and foreign exchange.

The challenges faced in the European Union are similar to those in the United States. With a limited number of investors (due to accreditation), Europe faces problems with liquidity when compared to ICOs. Also, it is difficult for retail investors to participate in STOs, due to existing regulations.
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