The Bank of Lithuania has issued guidelines on security token offerings to improve regularity clarity and improve protections for investors.
Within the document the regulator explains the classifications for security tokens and how they can be categorized as having features of securities or other financial instruments. Other areas covered in its guidelines include specific cases, recommendations to the issuance of tokens and a clarification of applicable legal regulation.
Companies looking to use the STO method for issuing tokens qualified as transferable securities or other financial instruments will need to meet EU and national legislation surrounding capital-raising activities.
Member of the Bank of Lithuania board Marius Jurgilas said, “The current focus on security token offerings is taking over the waning interest in initial coin offerings (ICOs). Businesses are interested in this particular way of raising capital as an alternative to bank lending.
“The Guidelines on Security Token Offering are aimed at explaining our position in this regard rather than creating new regulatory arrangements. In a strict regulatory environment, such as the securities market, it becomes crucial to set rules in order to avoid any miscommunication, misunderstandings and their consequences.”
The Bank of Lithuania has picked a technology-neutral approach to its regulations. This means if a certain product has features of a financial instrument, such as a security, it will apply relevant regulation and supervision regardless of the technology it uses.
However, due to the uniqueness of each case, they will all be considered individually, while considering the substance over the form.
Jurgilas added, “In case market participants are not sure whether their offered tokens are subject to regulation, we stand ready to provide them with consultation on this matter.”
When creating the guidelines, the Bank of Lithuania held two public consultations with market participants and noted their suggestions.
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