Security Tokens (STO)
A security token is a security represented through distributed ledger technology: in the EU it falls under MiFID II, not MiCA (in Spain, with an ERIR under Law 6/2023), and the SEC treats it as a security whatever its format. Unknown Gravity builds the smart contracts, on-chain records and transfer controls; your counsel and intermediaries handle the offering and the official register.
A security token is a share, bond, fund unit or other security recorded on a blockchain: securities rules still apply, and recording it on DLT can add rules of its own, such as the ERIR in Spain. At Unknown Gravity we design and build the technology for security token offerings (STOs) for issuers in the European Union, the United States and Latin America, with identity checks and transfer restrictions built into the token.
In the EU, a security token that qualifies as a financial instrument falls under MiFID II and outside MiCA (Art. 2(4)(a) of Regulation (EU) 2023/1114); in Spain, Law 6/2023 governs its representation on DLT and the appointment of an ERIR, the entity responsible for its register (Arts. 6 to 8). In the United States, the SEC treats it as a security whatever its format (Release 33-11412, 2026), and the offering is structured with your securities counsel.
01 / What are Security Tokens and how do they help your project?
A security token is a regulated financial product (a share, a bond, a unit in a fund) that, instead of being recorded in a company register or in a bank book entry, is recorded on a blockchain. The rules do not change: what changes is the ledger it is written in. They are used to represent shares in public limited companies, debt or units in funds, which also follow their own collective investment regime (Art. 2 LMVSI, BOE-A-2023-7053; Law 35/2003, BOE-A-2003-20331).
Our team of blockchain experts is responsible for creating solutions adapted to the needs of your project, so that the tokenization is efficient and fits the applicable rules.
02 / Security token offerings in the EU, the United States and Latin America
A security token offering (STO) is an offering of securities: the token does not create a new legal category, so each market applies its own securities rules to it. Compliance is assessed market by market; there is no single issuance valid everywhere at once.
| European Union (Spain) | United States | |
|---|---|---|
| Offering route | A prospectus approved under Regulation (EU) 2017/1129, unless an exemption applies (Law 6/2023, Art. 35(1)) | SEC registration or an exemption chosen with your counsel: Reg D Rule 506(b) or 506(c) (17 CFR 230.506), Reg A+ Tier 2 up to $75 million in 12 months (230.251(a)(2)) or Reg CF up to $5 million (227.100(a)(1)) |
| Register | An ERIR appointed in the issuance document (Law 6/2023, Art. 8(4)) | The issuer or its transfer agent; for Section 12 securities, whoever performs that role, including the issuer, must be registered as a transfer agent (Exchange Act §§3(a)(25) and 17A(c)(1)), and Reg A Tier 2 and Reg CF issuers need a registered transfer agent for the Section 12(g) exclusion (17 CFR 240.12g5-1(a)(7); 240.12g-6) |
| Placement | An entity authorized to provide investment services must take part if an offer exempt from the prospectus is advertised to the general public (Law 6/2023, Art. 36(1)) | If a third party places it, a registered broker-dealer; in Reg CF, a registered broker or funding portal is mandatory (17 CFR 227.100(a)(3) and 227.300(a)) |
| Secondary trading | DLT market infrastructures under the Pilot Regime (Regulation (EU) 2022/858) | An ATS, which must be operated by a registered broker-dealer (17 CFR 242.301(b)(1)) |
| Transfer restrictions the token enforces | Those set by the issuance and by the investor rules of the offer | Rule 144 holding period of 6 months or 1 year for Reg D Rule 506 securities (230.144(a)(3) and (d)(1)); 1 year for Reg CF (227.501(a)) |
See the exemptions in detail in our entry on Regulation D. In Latin America the rules change from country to country, and local counsel confirms how the token is classified before it is issued.
Where we work. We work on STOs in three regions. In the European Union, under MiCA and MiFID II and with an ERIR in Spain (see MiCA licensing by country); in the United States, with your securities counsel and under Reg D, Reg A+ or Reg CF (see asset tokenization in the United States); and in Latin America, with local counsel in each country (see asset tokenization in Latin America, country by country). We build the platform, the smart contracts and the integrations; the legal opinion and the regulated roles stay with your advisors and intermediaries.
03 / The real framework for security tokens: LMVSI, ERIR and ERC-3643, not MiCA
A security token that qualifies as a financial instrument is not governed by MiCA but by securities market regulation: in Spain, the LMVSI allows negotiable securities to be represented using distributed ledger technology and entrusts their registration to an ERIR (the entity responsible for registration and record-keeping), appointed in the issuance document and which must be one of the entities authorized to provide safekeeping and administration of financial instruments (Arts. 8(4) and 126(a) LMVSI, BOE-A-2023-7053). MiCA applies to other cryptoassets and their service providers.
On the technical side we work with standards designed for regulated issuances, such as ERC-3643, which builds into the token itself the identity verification and transfer restrictions required by regulation. Our job is to make the technology and the legal structure fit together from day one: we build the issuance technology alongside your legal advisors, develop and audit the smart contracts, and leave you with operations ready for regulatory scrutiny.
This content is for information purposes. It is not legal, tax or investment advice and does not replace consulting a professional. Regulation on tokenization and crypto-assets keeps evolving: check the current version of the rules cited on BOE and EUR-Lex.
Custody of the issued token
An issuance has to decide where the keys live and who authorizes each movement. We address that design in crypto wallet and custody development.
FAQ
Frequently asked questions
How does Unknown Gravity help in creating Security Tokens?
We specialize in the design and development of security tokens, from initial concept to issuance. In a securities issuance the reference document is the issuance document and, where the offer to the public does not fall within an exemption, the prospectus approved by the CNMV. The MiCA white paper is a different document and does not apply here.
That fit is something we work out together with your legal advisors (Arts. 7 and 35 LMVSI, BOE-A-2023-7053).
How does Unknown Gravity approach the legal compliance of Security Tokens?
We work with lawyers and regulatory experts so that the issuance fits the regulation of each jurisdiction where it will be marketed. The legal qualification is confirmed by local counsel in each country; we provide the technical structure and the transfer controls that qualification requires.
What types of assets can be tokenized as Security Tokens?
Not every asset can be tokenized as a security token. It takes a right that is identified and enforceable off-chain (a share, a bond, a credit right) and a legal structure that supports it. On that basis, issuances can be built around real estate, the share capital of public limited companies, debt or exploitation rights (Arts. 2 and 6 LMVSI, BOE-A-2023-7053).
Unknown Gravity is responsible for developing tailor-made solutions for the tokenization of the most diverse assets.
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