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STO vs ICO vs IPO: which route fits your company

Quick answer

The choice depends on what you issue and to whom. If you raise capital by offering transferable securities, the route is an STO (a tokenised securities offering) or an IPO (a stock-market listing); both are governed by MiFID II (Directive 2014/65/EU) and the LMVSI. An ICO is only an option if the token is not a financial instrument. The decisive test is the legal nature of the right the token carries, not the technology.

The three routes, in legal terms

It helps to separate the technological wrapper from the legal content. An STO (Security Token Offering) and an IPO issue the same thing as a matter of law: transferable securities. The difference lies in the medium and the target market. An ICO (Initial Coin Offering) issues a crypto-asset that, by definition, does not represent a financial instrument; if it did, it would cease to be an ICO in the proper sense and would be treated as a securities issuance.

The classification rule is strict. A token that grants economic or political rights equivalent to a share, a profit participation or a debt claim qualifies as a financial instrument and falls under MiFID II (Directive 2014/65/EU) and Spanish securities markets law. MiCA (Regulation (EU) 2023/1114) expressly excludes from its scope crypto-assets that are financial instruments (MiCA (Regulation (EU) 2023/1114), Art. 2(4)).

Applicable regulation

  • STO: the issuance of tokenised securities. MiFID II (Directive 2014/65/EU) and Ley 6/2023 (LMVSI), on securities markets and investment services, apply. The security is recorded on a blockchain through an ERIR (the entity responsible for registration and recording) (Ley 6/2023 (LMVSI), BOE-A-2023-7053).
  • IPO: a public offer of securities with admission to trading on a regulated market. The same securities-markets framework applies, with the added requirements of listing and a prospectus approved by the supervisor (Prospectus Regulation (EU) 2017/1129).
  • ICO: if the token is a non-financial crypto-asset, it is governed by MiCA (Regulation (EU) 2023/1114), which requires a white paper notified to the competent authority, not a prospectus. If the token turns out to be a security, MiCA does not apply and the operation is rerouted to the securities regime.

Cost and compliance burden

  • IPO: the most expensive route. A full prospectus, audits, advisers, placement fees and the recurring costs of a listed company. Only reasonable for large amounts.
  • STO: intermediate. It can rely on prospectus exemptions where the offer does not exceed the threshold set by national rules (up to EUR 8 million over twelve months under the Prospectus Regulation), which reduces the burden compared with an IPO without giving up the status of a security (Prospectus Regulation (EU) 2017/1129).
  • ICO: the MiCA white paper is less onerous than a prospectus, but the issuer must establish that the token is not a security, a legal analysis that is not trivial and whose error carries regulatory consequences.

Timelines

  • IPO: months, often more than a year between preparation, prospectus approval and admission to trading.
  • STO: faster when structured under a prospectus exemption; designating the ERIR and the legal structuring set the timetable.
  • ICO: the timeline is driven by drafting and notifying the white paper and, where applicable, authorising the issuer or service provider.

Investor type and liquidity

  • IPO: access to retail investors on a regulated secondary market, with the greatest liquidity of the three routes.
  • STO: aimed at professional investors or, with a prospectus or under an exemption, also at retail investors. Liquidity depends on whether a secondary market exists for the tokenised security, which is still developing.
  • ICO: investors who operate with crypto-assets. Liquidity is found on crypto-asset trading platforms, without the safeguards of a securities market.

Intermediate routes

For smaller amounts there is the crowdfunding regime, which allows raising up to EUR 5 million per project owner over twelve months through authorised platforms, under a specific framework distinct from the prospectus (ECSP Regulation (EU) 2020/1503).

Frequently asked questions

Is an STO the same as an IPO on a blockchain?

Not exactly. Both issue transferable securities, but an IPO involves admission to trading on a regulated market with an approved prospectus, whereas an STO can be structured without a listing and, where applicable, under a prospectus exemption. The medium is DLT in an STO; the legal nature of the security is common to both.

Can I run an ICO in Spain to fund my company with tokenised shares?

Not under the ICO format. If the token represents shares or economic rights typical of a security, it is classified as a financial instrument and the operation is an STO subject to securities law, not an ICO under MiCA (MiCA (Regulation (EU) 2023/1114), Art. 2(4)).

Which supervisor is involved in each case?

In an STO and an IPO, the securities markets authority is involved under MiFID II (Directive 2014/65/EU) and the LMVSI. In an ICO of non-financial crypto-assets, the supervisory regime is that of MiCA (Regulation (EU) 2023/1114).

Do I always need a prospectus for an STO?

Not always. An exemption is available where the offer does not exceed the applicable national threshold and the conditions of the Prospectus Regulation are met. Below that threshold, the STO avoids the prospectus without losing its status as a security (Prospectus Regulation (EU) 2017/1129).

What this means for you

Before choosing a route, determine the legal nature of what you are going to issue. If you are offering a stake in your capital or debt claims, you are dealing with a security and the real decision is between an STO and an IPO, depending on the amount, the target audience and whether you need a listing and regulated-market liquidity. An ICO is only an option if the token serves a function other than that of a financial instrument. Technology does not change the classification; the right embodied does.

This content is for general information and educational purposes only. It is not legal, tax or investment advice and does not replace consultation with a qualified professional. Regulation on tokenisation and crypto-assets evolves; always check the version in force of the rules cited in the BOE (boe.es) and EUR-Lex (eur-lex.europa.eu).

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