The rise of regulated tokenization has boosted the popularity of Security Token Offering (STO) as an innovative method for issuing financial securities in digital format.
In Europe, the launch of an STO requires compliance with a rigorous regulatory framework that protects investors and issuers.
This comprehensive guide is aimed at companies, startups, investors and legal advisors who want to understand step by step how to design, register and launch an STO in compliance with current European legislation. We will analyze regulatory, technical and operational aspects essential for a successful launch.
What is a Security Token Offering (STO)?
Un Security Token Offering (STO) is a public or private offering of tokens that represent financial securities (shares, debt, shares, etc.) issued on a blockchain.
Unlike Initial Coin Offerings (ICOs), STOs meet strict regulatory standards and offer investors clear and protected legal rights.
Key Differences Between STO and ICO
- Legal Compliance: STOs are regulated under financial laws, while ICOs often lack oversight.
- Investor Rights: tokens in STO grant economic, voting or asset participation rights.
- Safety and Trust: regulation provides guarantees and transparency for both parties.
European regulatory framework for STOs
MiFID II and the regulation of digital securities
In Europe, the MiFID II directive regulates financial instruments and their markets. Tokens that qualify as digital securities must comply with this regulation, which involves registration, transparency and oversight.
MiCA (Markets in Crypto-Assets) Regulation
The MiCA regulation, still in the process of being implemented (2025 - date on which this entry was written), will establish a harmonized framework for digital assets, including security tokens, facilitating unified regulation in the EU.
National laws and the CNMV in Spain
In addition to European regulation, each member country has supervisory authorities, such as the CNMV in Spain, that establish specific requirements for the issuance and commercialization of digital securities.
Step by step to launch an STO in Europe
1. Define the asset and the structure of the token
- Select the type of security to tokenize (shares, debt, shares).
- Design the structure of the token: rights, dividends, duration and governance.
- It defines the economic and legal model of the token.
2. Perform legal and compliance analysis
- Determine the token's classification under MiFID II and MiCA.
- Prepare the prospectus or informational document in accordance with legal requirements.
- It implements AML/KYC processes for investor identification.
- Hire legal advice specialized in financial regulation and blockchain.
3. Choosing the blockchain technology and platform
- Select a public or private blockchain that allows regulatory compliance.
- Consider platforms that specialize in the issuance of security tokens with integrated compliance features.
4. Record the issue and obtain authorizations
- Submit the prospectus to the appropriate regulatory authorities.
- Request registration in official registries, such as the ERIR in Spain for securities tokens.
- In the case of a public offering, obtain prior approval from the CNMV or the local authority.
5. Launch the STO and manage the issue
- Make the offer to previously identified and authorized investors.
- It manages the issuance, assignment and custody of tokens.
- It facilitates trading on authorized secondary markets or compatible platforms.
6. Report and comply with post-issue obligations
- Maintain informational transparency with regular reports.
- Manage corporate events (dividends, votes, transfers).
- It ensures secure custody and rights management for token holders.
Benefits of launching an STO in Europe
- Access to a regulated and secure market which protects investors and boosts trust.
- Reduction of intermediaries and process automation using smart contracts.
- Increased liquidity by allowing trading in authorized secondary markets.
- Attracting institutional investors that require regulated assets.
- Regulatory compliance that facilitates internationalization and cross-border collaboration.
Risks and challenges to consider
- Regulatory complexity which requires expert legal and technical advice.
- High initial costs to comply with all legal and technological requirements.
- Evolving regulatory changes that may affect operations.
- Market education to attract and convince investors about the security and benefits of the STO.
Conclusion
Launch a Security Token Offering (STO) in Europe it is a revolutionary opportunity for companies that want to finance themselves through digital assets, with the trust and support offered by regulation.
Complying with the legal framework, selecting the right technology and properly managing the emission are key factors for success.
If you are interested in developing an STO, having specialized legal and technological advice will be essential to navigate this new financial paradigm.