Security Token

A security token is a digital asset issued on a blockchain representing financial or legal rights over an underlying asset such as a stock, bond, interest in a company, investment fund, real estate, securitized debt or other regulated financial instrument. Unlike utility tokens, security tokens are financial instruments and are governed by securities-market rules: MiFID II, MiFIR and, in Spain, Law 6/2023 (LMVSI), with the CNMV as supervisor and a designated ERIR (the entity responsible for registering and recording securities represented by distributed ledger technology, Arts. 7 and 8 of Law 6/2023) keeping the register. MiCA does not apply to them: it expressly excludes crypto-assets that qualify as financial instruments (Art. 2(4) of Regulation (EU) 2023/1114; Arts. 7 and 8 of Law 6/2023, BOE-A-2023-7053).

This type of tokenization allows you to digitize real or financial assets, facilitating their issuance, fractionalization, management, transfer and settlement through smart contracts, improving operational efficiency and reducing intermediate costs. Investors who purchase security tokens can have access to dividends, voting rights, economic returns, priority in the distribution of profits or equity participation, depending on the type of security represented.

To be considered a security token, the digital asset must meet the criteria established by authorities such as SEC in the United States (Howey test) or their equivalence in European jurisdictions. This involves requirements of KYC/AML, clear legal governance, risk disclosure and, in many cases, the intervention of regulated platforms, custodians and electronic registration systems such as ERIRs.

Security tokens open up new opportunities to finance companies, tokenize shares, issue debt or represent future rights, and are revolutionizing sectors such as real estate investment, venture capital, corporate finance and the tokenization of RWA (Real World Assets).