Security Token Offerings

Security Token refers to any token which may be classified as a security under the law. There is no specific form of a security token, but any token or coin (in an ICO) which fulfills for the US fulfills the conditions laid down in the Howey Test or the Risk Capital Test and certain cases the Reves Test. There are similar legal provisions or case law in other jurisdictions.

Irrespective of whether the Tokens are explicitly called Security Tokens or not by the issuer, the regulators are likely to evaluate each Token on a case by case basis and come to a conclusion of whether or not it is a security. This may prove to be very important because when a Token is considered as a security, there are several additional compliances which need to be in place before its issuance and during the process of circulation.

Evaluating the features associated with the Tokens by qualified experts before their issuance can help the issuer identify whether the Token is likely to be considered as a security and enable him to take the necessary steps to comply with the regulations for its issuance.

For issuers, who are willing to explicitly issue a Security Token, there are several additional possibilities of how a Token may be structured. The Security Token can represent the tokenized form of some securities, including but not limited to:

  • Shares of a Company
  • Bonds and Debentures
  • Derivative assets
  • Real estate and related assets
  • Precious metals, diamonds, and other internationally traded metals and raw materials
  • Tokenized form of other assets

The issuance of a Security Token, however, needs to comply with the law and the experts of Empire Global can assist you with the entire process commencing from the stage of planning a security token to its issuance. Issuers of a Security Token have some advantages associated with their Tokens including:

  • The clear possibility of marketing the Token to a specified audience
  • Ability to create a variety of different types of Tokens
  • A clear understanding of the investor of the nature of the Token
  • Greater transparency on the Token Offering

Security Token offerings, if they are structured in the right manner, may take advantage of the specific exemptions under US law (Regulation D, Regulation S, Regulation A+ or Regulation CF), but the entire process must be conducted in a compliant manner to receive the exemptions. It is therefore recommended that you get in touch with Empire Global immediately if you are interested in offering a Security Token and we will guide you with a suitable plan.