STO’s have certainly gained a lot of traction over the past few months amongst both start-ups and also established successful companies. An STO is very different to an ICO. Unlike an ICO, a security token represents an investment contract into an underlying investment asset, such as stocks, bonds, funds or commodities.

Malta has taken the same stance as ESMA (European Securities and Markets Authorities) in that Security Tokens are essential traditional securities with the difference being that the rights and obligations linked to the security are embedded on a token and recorded on a Blockchain or a DLT.

The Maltese legislator (till now) has decided to regulate STOs in a similar manner to IPOs and therefore much of the traditional EU securities regulations such as MIFID and the prospectus document exemptions found in the Prospectus Directive will still apply. Therefore although there are some different legal applications and processes between traditional securities and STOs we would advise that companies already have some sort of a track record before they start preparing to do an STO.

Malta has published a consultation paper providing some guidance when it comes to Security tokens and how capital market players should approach shifting their operations to DLT or blockchain. A couple of key points which were covered include the type of Blockchain or DLT application which should be used (permissioned or permissioned DLT) and whether Security Token Issuers Companies need to have 3 years financial history.

Security Token Offerings include: Equity Tokens, Bond Tokens and Commodity Tokens.

Some key benefits are: better retail investor reach, more liquidity, fractional ownership, and faster settlements.

The process/requirements which we will assist you with include the following:

• Corporate structuring or restructuring
• Drafting of a Prospectus document together with our partners (unless an exemption applies in which case an Offering Document will suffice) to be registered and approved by the relevant authorities
• Liaising with Primary Markets partners (sponsors/investment bank)
• Listing on Exchanges (Secondary Markets)
• Latest STO news: The Maltese Stock Exchange (MSE) has signed a Memorandum of Understanding (MOU) with OKEX stating that they are launching an STO Exchange. This is huge news for STO enthusiasts since this move adds another player and layer for the infrastructure for Capital Market players looking to move into tokenisation and Blockchain/DLT.

Various international players such as the Swiss Stock Exchange, Australian Stock exchange and a French based CSD have all confirmed that they have shifted to DLT. This shows how the ecosystem is slowly forming and the different players needed to complement each other in this new ecosystem have started to make the shift. These players will give issuers the comfort they need to also make the shift and in time important components such as liquidity will be satisfied!

The emergence of stablecoins are also interesting in the realm of capital markets since they could satisfy and replace banks when it comes to the post trade settlement layers. Read more on what stablecoins are in article written by one of our experts here

We could form part of your advisory board and take care of roping in the right partners from our excellent network in order to provide you with a full service and therefore extending to partners such as; tokenizer (techies needed to assist in creating tokens, wallets, blockchain), primary markets players, AML/KYC partners and more.