Security Token Offerings — STOs

Secu­ri­ty Token Offer­ings — “STOs” — are cur­rent­ly one of the hottest top­ics in the blockchain scene. Some experts even claim that they are “The Next Big Thing” and pre­dict that they will soon out­grow ICOs in num­ber and invest­ment vol­ume. But is that actu­al­ly true? Or is it more of a hype than real­i­ty?

In fact, more and more start-ups and larg­er com­pa­nies con­sid­er con­duct­ing an STO. A lot of argu­ments speak for an STO, but there are also some down­sides that need to be tak­en into con­sid­er­a­tion. In addi­tion, the field is still very young and evolv­ing, so that legal cer­tain­ty and clear process­es are still lack­ing.

We are also con­vinced that Secu­ri­ty Token Offer­ings will fun­da­men­tal­ly change the blockchain scene in the com­ing weeks and months. There­fore, we decid­ed to ded­i­cate a 3‑part series to the emerg­ing field of secu­ri­ty tokens and STOs.

How­ev­er, before we define Secu­ri­ty Token Offer­ings in more detail, dis­tin­guish them from oth­er forms of cap­i­tal pro­cure­ment and describe the pro­ce­dure for an STO, we must first dis­cuss what a Secu­ri­ty Token is.

Wait a minute — “STOs”… What is a security token anyway?

The dif­fer­ence between an ICO and an STO lies in the type of token issued by an issu­ing enti­ty. The term ICO does not pro­vide any direct infor­ma­tion about which token is issued. In most cas­es, how­ev­er, this is a util­i­ty token. A util­i­ty token serves as the sole means of pay­ment on the plat­form of the com­pa­ny con­cerned. Cus­tomers pay for the con­sump­tion of ser­vices with the token, while ser­vice providers are paid in the util­i­ty token of the plat­form. Impor­tant: the acqui­si­tion of util­i­ty tokens is not linked to the acqui­si­tion of rights or oblig­a­tions; it is not a finan­cial instru­ment. With a Secu­ri­ty Token Offer­ing, as the name already indi­cates, a Secu­ri­ty Token is issued.

A secu­ri­ty token is cre­at­ed by the tok­eniza­tion of cer­tain rights, such as the right to an inter­est pay­ment or the repay­ment of a loan. Because rights are secu­ri­tised, the secu­ri­ty token is a finan­cial instru­ment or a secu­ri­ty accord­ing to the respec­tive nation­al leg­is­la­tion of the coun­try in which the secu­ri­ty token is issued. The event in the course of which a secu­ri­ty token is issued is referred to as Secu­ri­ty Token Offer­ing — STO. The term STO has estab­lished itself in recent weeks and months because more and more com­pa­nies and ven­ture cap­i­tal firms regard an STO as an attrac­tive and inex­pen­sive alter­na­tive to an ICO.

Advantages of Security Tokens

Just like every oth­er types of tokens, secu­ri­ty tokens have advan­tages and dis­ad­van­tages. In the cur­rent some­what hyped dis­cus­sion, the advan­tages are empha­sised in detail, but the dis­ad­van­tages of this type of token should not be ignored.

A major advan­tage is that secu­ri­ty tokens offer increased com­pli­ance with legal require­ments. This is ulti­mate­ly ben­e­fi­cial for investors, the exe­cut­ing com­pa­ny and reg­u­la­tors. In many coun­tries, reg­u­la­tors are cur­rent­ly pri­mar­i­ly reac­tive and spend a lot of time review­ing ICOs that have been filed or are already on the mar­ket for com­pli­ance with reg­u­la­tions in place to imple­ment fundrais­ing mea­sures. In most cas­es there is still no clear legal frame­work for ICOs, as Mal­ta has already devel­oped, to deter­mine whether a token is a util­i­ty token or a secu­ri­ty token. Because smart con­tracts (see lat­er sec­tion on smart con­tracts) enable the writ­ing into code of laws and rules as well as their auto­mat­ic enforce­ment, reg­u­la­tors can proac­tive­ly ensure com­pli­ance by set­ting poli­cies. For exam­ple, it is pos­si­ble to use smart con­tracts to ensure that tokens can only be trans­ferred to investors (more specif­i­cal­ly, their wal­let address­es) that have pre­vi­ous­ly been approved through KYC process­es. In addi­tion, cer­tain reten­tion peri­ods can be pro­grammed into Smart Con­tracts so that tokens can­not be sold pre­ma­ture­ly.

The issu­ing of a secu­ri­ty token enables investors to get so-called “frac­tion­al own­er­ship”. Because an under­ly­ing secu­ri­ty is divid­ed into a cer­tain num­ber of tokens, issuers ben­e­fit from increased liq­uid­i­ty and a much larg­er cir­cle of poten­tial investors. The large cir­cle of poten­tial investors and usu­al­ly low min­i­mum invest­ment sums mean high­er liq­uid­i­ty for the com­pa­ny, because tokens can eas­i­ly be sold and bought. With appro­pri­ate mar­ket­ing, the com­pa­ny can attract more cap­i­tal from a larg­er cir­cle of investors.

Secu­ri­ty tokens are also extreme­ly attrac­tive for investors. Vir­tu­al­ly every inter­est­ed investor world­wide who has Inter­net access and a cor­re­spond­ing wal­let can pur­chase Secu­ri­ty Tokens. Through frac­tion­al own­er­ship, investors gain access to invest­ments in goods or mar­kets that were pre­vi­ous­ly reserved for large investors due to high min­i­mum invest­ment sums.

Secu­ri­ty tokens offer anoth­er impor­tant legal advan­tage. Because the blockchain as a tam­per-proof, robust data­base doc­u­ments all trans­ac­tions and changes in token own­er­ship, reg­u­la­tors can eas­i­ly track how tokens have changed own­er­ship and who cur­rent­ly owns them. This enables effi­cient audit pro­ce­dures and elim­i­nates the risk of tax eva­sion, manip­u­la­tion and attempt­ed fraud.

Final­ly, secu­ri­ty tokens over­come a com­mon prob­lem of util­i­ty tokens — high price fluc­tu­a­tions. Because secu­ri­ty tokens are based on the tok­eniza­tion of rights and real val­ues, they usu­al­ly lead to more sta­bil­i­ty. It is eas­i­er for investors and third par­ties to deter­mine the real val­ue of the tokens, which leads to increased cer­tain­ty as to their val­ue and a bet­ter basis for deci­sion-mak­ing. Com­pa­nies, on the oth­er hand, do not have to fear sud­den sales by a major­i­ty of investors and result­ing, dras­tic depre­ci­a­tion of their tokens. This phe­nom­e­non, known as “pump and dump” in the behav­iour of many spec­u­la­tors, can, how­ev­er, already be pre­vent­ed by spec­i­fy­ing cer­tain vest­ing peri­ods in the Smart Con­tracts.

Disadvantages of Security Tokens

How­ev­er, this also has some dis­ad­van­tages, which pri­mar­i­ly con­cern the issu­ing of a secu­ri­ty token. A com­pa­ny might decide against using a secu­ri­ty token, as with their acqui­si­tion, an investor also gets a legal claim against the com­pa­ny. This should be tak­en into account in the plan­ning of legal and token eco­nom­ics aspects of the entire busi­ness mod­el.

A fur­ther dis­ad­van­tage is the fact that the field of secu­ri­ty tokens is still so young and evolv­ing that so far there is hard­ly any legal and tech­ni­cal expe­ri­ence or estab­lished best prac­tices to fol­low. This rais­es anoth­er ques­tion: in which coun­try or which leg­is­la­tion should the Secu­ri­ty Token be issued and an STO take place? In addi­tion to the pos­si­bil­i­ty of com­pe­tent legal advice, the deci­sion should above all be based on the applic­a­ble laws, legal clar­i­ty with regard to cryp­to cur­ren­cies and dig­i­tal assets, and the government’s open­ness to the sub­ject of dig­i­tal assets and blockchain. One loca­tion that ful­fils all these cri­te­ria is e.g. the Blockchain Island Mal­ta.

Com­pared to issu­ing a util­i­ty token as part of an ICO, issu­ing a secu­ri­ty token is a more com­plex legal mat­ter. Due to the small num­ber of STOs car­ried out so far, an ongo­ing exchange and close coor­di­na­tion with the finan­cial super­vi­so­ry author­i­ties must take place in advance of the STO. Reg­u­la­to­ry author­i­ties must check the planned secu­ri­ty token’s com­pli­ance with exist­ing laws and give an explic­it approval of the token. Only with this legal pro­tec­tion can an STO be car­ried out. Because such a review is com­plex and legal­ly unchart­ed ter­ri­to­ry, inter­est­ed com­pa­nies must sched­ule a process last­ing sev­er­al months for the devel­op­ment and prepa­ra­tion of an STO.

So far for an intro­duc­tion to the basics of secu­ri­ty tokens and their dif­fer­en­ti­a­tion from util­i­ty tokens. In the next, sec­ond part of our series on Secu­ri­ty Token Offer­ings, we will look in detail at STOs and how they dif­fer from IPOs and ICOs. In addi­tion, in a forth­com­ing arti­cle we will look at the impor­tance of smart con­tracts for the imple­men­ta­tion of STOs. We will also take a clos­er look at the rapid­ly devel­op­ing field of Secu­ri­ty Token Exchanges and illus­trate why Mal­ta is a suit­able loca­tion for con­duct­ing an STO.

Which rights can be tokenised

In the first part of our 3‑part series on Secu­ri­ty Token Offer­ings we dealt with the basics of secu­ri­ty tokens and their advan­tages and dis­ad­van­tages com­pared to reg­u­lar util­i­ty tokens. In the sec­ond part of the series, we look at which rights can be tokenised as secu­ri­ty. We will also define Secu­ri­ty Token Offer­ings in more detail and dif­fer­en­ti­ate them from IPOs and ICOs. Final­ly, we are going to describe the role Smart Con­tracts play in the imple­men­ta­tion of STOs and the trad­ing of secu­ri­ty tokens.

Tokenization of rights on the blockchain: different arrangements possible

Impor­tant: Secu­ri­ty tokens can be very dif­fer­ent — a large num­ber of rights can be tokenised to vary­ing degrees. One pos­si­bil­i­ty is, for exam­ple, the right to par­tic­i­pate in the company’s prof­its or to receive a pay­ment. Anoth­er pos­si­bil­i­ty would be for token own­ers to have a right to repay­ment of a loan.

But vot­ing and co-deter­mi­na­tion rights can also be tokenised. An STO of the com­pa­ny “Hydromin­er” pre­pared in Aus­tria, for exam­ple, gives token own­ers the right to par­tic­i­pate in busi­ness deci­sions in addi­tion to prof­it shar­ing, as well as a right of co-sale if a qual­i­fied major­i­ty of the own­ers would decide to sell their tokens.

It should there­fore be not­ed that secu­ri­ty tokens may resem­ble clas­sic shares, but the con­crete rights dif­fer from case to case. As these are indi­vid­ual cas­es and depend on the design of the use case/blockchain ven­ture, con­sul­ta­tion with the super­vi­so­ry author­i­ty at the plan­ning stage is nec­es­sary and advis­able in all cas­es. This is the only way to ensure that the legal struc­ture and details of the token are such that the cap­i­tal mar­ket prospec­tus is ulti­mate­ly approved by the super­vi­so­ry author­i­ty. There­fore, when select­ing a loca­tion for an STO, it is par­tic­u­lar­ly impor­tant to choose a coun­try where super­vi­sors are avail­able to prop­er­ly elab­o­rate these aspects in advance of an STO.

Difference between STO and ICO

STOs are not only an attrac­tive alter­na­tive to issu­ing shares (see sec­tion “Dif­fer­ence between STO and IPO”), but many start-ups and estab­lished com­pa­nies com­pare them against ini­tial coin offer­ings. The dif­fer­ence between ICO and STO is quite sim­ple: Where­as it is typ­i­cal­ly a util­i­ty token that is issued for an ICO, in the case of an STO it is always the emis­sion of a secu­ri­ty token. Util­i­ty tokens are pure means of exchange on the company’s plat­form, secu­ri­ties reg­u­la­tions do not apply to them.

Until recent­ly, prac­ti­cal­ly all start-ups were busy demon­strat­ing and con­vinc­ing that their token was exclu­sive­ly a util­i­ty token. The clear inten­tion was of course to avoid the legal oblig­a­tions aris­ing with the issu­ing of secu­ri­ties — such as oblig­a­tions to inform, pub­li­ca­tion of a secu­ri­ties prospec­tus, etc. — and part­ly to avoid hav­ing to face high legal penal­ties.

That’s about to change. The ben­e­fits of STOs are con­vinc­ing more and more com­pa­nies to seek an STO instead of an ICO. The main argu­ment in favour of an STO is the increased legal secu­ri­ty that results from the issue of a legal­ly com­pli­ant secu­ri­ty. Many tokens declared by com­pa­nies them­selves as “util­i­ty tokens” are crit­i­cal­ly exam­ined by super­vi­so­ry author­i­ties. Time and again it has hap­pened that author­i­ties have clas­si­fied a token issued as UT as secu­ri­ty and the issu­ing com­pa­ny has sub­se­quent­ly been sued. This could ulti­mate­ly lead to the com­pa­ny hav­ing to seise oper­a­tions.

How­ev­er, the process of an ICO and an STO is usu­al­ly very sim­i­lar. The pri­ma­ry dif­fer­ence is the increased time and finan­cial expense incurred by an STO for reg­u­la­to­ry review of the token and legal advice. How­ev­er, the KYC process­es required in the course of the STO are now also car­ried out by prac­ti­cal­ly all com­pa­nies in the course of their ICO for legal pro­tec­tion. While ICOs usu­al­ly “only” pub­lish a white paper, STOs must pub­lish a legal­ly com­pli­ant secu­ri­ties prospec­tus.

Difference between an STO and an IPO

We have already dis­cussed that a secu­ri­ty token resem­bles a clas­sic secu­ri­ty or finan­cial instru­ment and must be legal­ly clas­si­fied as such. But how does the issu­ing of a Secu­ri­ty Token (= STO) dif­fer from an ordi­nary IPO?

Let us first take a look at the pro­ce­dure of a clas­sic Ini­tial Pub­lic Offer­ing. If a com­pa­ny plans to issue shares as part of an IPO, this must be noti­fied to the rel­e­vant super­vi­so­ry author­i­ty, such as the Bafin in Ger­many, the Secu­ri­ties and Exchange Com­mis­sion (SEC) in the USA or the Mal­ta Finan­cial Ser­vices Author­i­ty (MFSA) in Mal­ta. Part of the legal due dili­gence is the prepa­ra­tion and pub­li­ca­tion of a legal­ly com­pli­ant cap­i­tal mar­ket prospec­tus by the issu­ing com­pa­ny. The actu­al han­dling of the IPO is usu­al­ly car­ried out by an invest­ment bank. It usu­al­ly takes over all shares to be issued, but also accepts respon­si­bil­i­ty for their sales as well as admin­is­tra­tive pro­ce­dures required.  For offer­ing these ser­vices and assum­ing sub­stan­tial risk, the invest­ment bank charges a hefty com­mis­sion. The bank places the shares on the stock mar­ket, investors then buy the shares on the stock mar­ket from the bank.

STOs also issue equi­ty-like secu­ri­ties, but tech­ni­cal set­tle­ment is dra­mat­i­cal­ly sim­pli­fied by blockchain tech­nol­o­gy and smart con­tracts. Smart Con­tracts enable auto­mat­ic pro­cess­ing of the issue and sale accord­ing to pre-defined rules. The result­ing automa­tion of trans­ac­tions enables the elim­i­na­tion of inter­me­di­aries. There is no need for a bank to organ­ise the place­ment and the ini­tial sale. Instead, how­ev­er, com­pa­nies should rely in advance on inten­sive legal advice from a law firm spe­cial­is­ing in cryp­toser­vices. The elim­i­na­tion of an invest­ment bank as an inter­me­di­ary enables great­ly reduced fees and faster order exe­cu­tion. There­fore, min­i­mum invest­ment amounts may be low­er and the company’s secu­ri­ty tokens may be made avail­able to a wider group of poten­tial investors. In addi­tion, the finan­cial insti­tu­tions involved have no way of – pos­si­bly delib­er­ate­ly – influ­enc­ing the STO process in their favour.

The Role of Smart Contracts in STOs

Any­one deal­ing with Secu­ri­ty Token Offer­ings must take a clos­er look at a dom­i­nant tech­ni­cal phe­nom­e­non: Smart Con­tracts. They rep­re­sent the tech­ni­cal basis for the issuance and trad­ing of secu­ri­ty tokens. But what is a Smart Con­tract? These are agree­ments pro­grammed in code, the pro­vi­sions of which are auto­mat­i­cal­ly imple­ment­ed when cer­tain frame­work con­di­tions are met.

Smart Con­tracts are exe­cut­ed as decen­tralised apps (dApps) on Smart Con­tract-enabled blockchain pro­to­cols such as the Ethereum Blockchain. Prac­ti­cal­ly all process­es of a Secu­ri­ty Token Offer­ing are han­dled by Smart Con­tracts.

  • Specif­i­cal­ly designed Smart Con­tracts con­trol the trans­fer of invest­ment sums from investors to the wal­let address of the secu­ri­ty token-issu­ing com­pa­ny.
  • Once the invest­ment has been received and the min­i­mum invest­ment tar­get (= soft cap) has been reached, the cor­re­spond­ing num­ber of tokens is auto­mat­i­cal­ly trans­mit­ted to the invest­ing wal­let address­es on the spec­i­fied date. Smart Con­tracts thus allow auto­mat­ed pro­cess­ing of the token issue and thus elim­i­nate banks that act as clear­ing agents or inter­me­di­aries for IPOs.
  • Smart Con­tracts can be pro­grammed with the log­ic pro­vid­ed depend­ing on the appli­ca­tion. Com­mon exam­ples are so-called “whitelist­ing”, which means that only explic­it­ly per­mit­ted wal­let address­es and their own­ers can receive such tokens. Also, a con­trary pro­ce­dure — “black­list­ing” is pos­si­ble: here some wal­let address­es are pro­vid­ed to which no tokens may be sent. Oth­er exam­ples of rules pro­grammed in Smart Con­tracts are vest­ing peri­ods, but also co-deter­mi­na­tion rights.
  • Smart Con­tracts also enable the auto­mat­ed pay­ment of prof­it shares at the end of a fis­cal year — cor­re­spond­ing to the div­i­dend pay­ment for clas­sic shares.
  • Trad­ing on Secu­ri­ty Token Exchanges — as described in more detail in the next sec­tion — is also only pos­si­ble through Smart Con­tracts.

In the next, third and last part of our series we will deal with the role of Secu­ri­ty Token Exchanges as a sec­ondary mar­ket for Secu­ri­ty Token. In addi­tion, cur­rent efforts to estab­lish Secu­ri­ty Token Exchanges in Mal­ta are pre­sent­ed and why Mal­ta is cur­rent­ly prob­a­bly the most attrac­tive loca­tion for STOs.

Security Token Exchanges

In the third and last part of our series on Secu­ri­ty Token Offer­ings we deal with Secu­ri­ty Token Exchanges. We describe the emer­gence of secu­ri­ty token exchanges as a sec­ondary mar­ket for secu­ri­ty tokens as a result of the ongo­ing STO trend. We then report on cur­rent projects to estab­lish Secu­ri­ty Token Exchanges in Mal­ta before show­ing why Blockchain Island is a par­tic­u­lar­ly attrac­tive loca­tion for con­duct­ing an STO.

Secu­ri­ty Token Exchanges (STEs) as sec­ondary mar­ket for Secu­ri­ty Token

Secu­ri­ty Token Offer­ings com­bine the strict require­ments and legal pro­tec­tion of clas­sic secu­ri­ties with the decen­tralised, smart con­tract-based nature of blockchain tech­nol­o­gy. With the advent of secu­ri­ty token offer­ings, a new type of exchange is also emerg­ing: Secu­ri­ty Token Exchanges (= STEs).

While all types of tokens (pri­mar­i­ly util­i­ty tokens) can be trad­ed on nor­mal cryp­to exchanges, STEs are designed exclu­sive­ly for the trad­ing and sale or pur­chase of secu­ri­ty tokens. This is nec­es­sary in order to best suit the spe­cial prop­er­ties of secu­ri­ty tokens. With the sale of the token at the STE, the tokenised right is also trans­ferred to the new own­er of the token. Secu­ri­ty token exchanges there­fore rep­re­sent the sec­ondary mar­ket for secu­ri­ty tokens. The greater the num­ber of secu­ri­ty tokens issued, the more impor­tant STEs will become.

As this is also an indus­try that is still in its infan­cy, it remains to be seen how the mar­ket will actu­al­ly devel­op. One pos­si­ble sce­nario is that the increas­ing num­ber of secu­ri­ty tokens issued will force exist­ing mar­ket lead­ers such as Binance, OKEx and oth­er cryp­to cur­ren­cy exchanges to inte­grate the func­tion­al­i­ty of a STEs into their ser­vice port­fo­lio.

An alter­na­tive sce­nario is that, due to the dif­fer­ent require­ments for trad­ing secu­ri­ty tokens, spe­cialised trad­ing plat­forms on which only secu­ri­ty tokens can be trad­ed will pre­vail over con­ven­tion­al util­i­ty tokens and estab­lish them­selves on the mar­ket. It is undis­put­ed that they will con­tribute to mak­ing secu­ri­ty tokens increas­ing­ly attrac­tive as an alter­na­tive to tra­di­tion­al secu­ri­ties, because the for­mer can be trad­ed more eas­i­ly, quick­ly and cheap­ly. Final­ly, the own­er­ship of the token serves as proof of own­er­ship and enti­tle­ment for any rights asso­ci­at­ed with the token.

Several Security Token Exchanges planned in Malta

Already in July this year, Neu­fund, an equi­ty-based token plat­form (a spe­cial form of secu­ri­ty token), announced a col­lab­o­ra­tion with MSX, a Fin­tech-spe­cialised sub­or­gan­i­sa­tion of the Mal­ta Stock Exchange. The aim is to cre­ate the first reg­u­lat­ed, decen­tralised glob­al stock exchange.

So-called tokenised secu­ri­ties as well as oth­er dig­i­tal assets are to be list­ed and trad­able. By the end of 2018, this par­ties want to have joint­ly test­ed this in a pilot project. Equi­ty dis­trib­uted on tokens is issued via new funds as the pri­ma­ry mar­ket. Neu­fund and Mal­ta-based Kryp­to-Exchange Binance have also formed a part­ner­ship. The equi­ty token issued as part of the pilot project will then be trad­able on Binance as a sec­ondary mar­ket.

The 3 com­pa­nies share a long-term vision of a com­plete ecosys­tem in which token-based secu­ri­ties can be issued and trad­ed using blockchain tech­nol­o­gy, all of which will of course be legal­ly com­pli­ant and legal­ly bind­ing.

How­ev­er, the Mal­ta Stock Exchange would like to explore fur­ther poten­tial with its MSX accel­er­a­tor. Togeth­er with Binance com­peti­tor OkEX, which is also based in Mal­ta, the com­pa­ny is also work­ing on the devel­op­ment of its own exchange on which secu­ri­ty tokens can be trad­ed.

A Mem­o­ran­dum of Under­stand­ing (MoU) between the two par­ties was signed in July 2018. The plat­form is called OKMSX and is expect­ed to go live in the 1st quar­ter of 2019 and serve clients world­wide. Accord­ing to its own state­ments, this will also pri­mar­i­ly be a trad­ing plat­form for secu­ri­ty tokens at the insti­tu­tion­al lev­el.

Mal­ta has recog­nised which way the wind is blow­ing. Exchanges, in par­tic­u­lar, will play a key role in a future in which blockchain tech­nol­o­gy will trans­form many indus­tries sus­tain­ably and per­ma­nent­ly.

Malta as a location for STOs

When it comes to select­ing a loca­tion for a Secu­ri­ty Token Offer­ing, Mal­ta is at the top of the list. As the above exam­ples show, the Mal­tese gov­ern­ment and the Mal­ta Stock Exchange are already prepar­ing for the first wave of secu­ri­ty token offer­ings and the estab­lish­ment of secu­ri­ty token exchanges. In fact, no oth­er coun­try can cur­rent­ly com­pete with Mal­ta in terms of attrac­tive­ness and pop­u­lar­i­ty as a poten­tial loca­tion for an STO.

Since join­ing the EU in 2004, Mal­ta has made a name for itself as an inter­na­tion­al finan­cial cen­tre. The tech­nol­o­gy-friend­ly Mal­tese gov­ern­ment is open to blockchain, dig­i­tal assets and tokenised secu­ri­ties. Proac­tive­ly, con­ven­tions are being organ­ised to pro­mote the estab­lish­ment of blockchain com­pa­nies, which find here a clear legal frame­work for the licens­ing of dig­i­tal assets.

Tax aspects also speak for the Blockchain Island Mal­ta. Com­pa­nies that have col­lect­ed cryp­to deposits ben­e­fit from the advan­ta­geous and favourable cor­po­rate income tax rate. Invest­ment income and cap­i­tal gains gen­er­at­ed by cryp­to-funds are tax-exempt. In addi­tion, per­son­nel and oper­at­ing costs are below the lev­el of West­ern Euro­pean EU coun­tries, giv­ing anoth­er rea­son for locat­ing the com­pa­ny on the sun­ny Mediter­ranean island. Through the EU inter­nal mar­ket, STOs that have been clas­si­fied as reg­u­lat­ed and legal by the Mal­ta Finan­cial Ser­vices Author­i­ty can become active and attract investors in all EU mem­ber states.

Posi­tioned as “Blockchain Island”, Mal­ta has become an inter­na­tion­al hub for the cryp­to scene. More and more com­pa­nies, founders and devel­op­ers have fol­lowed indus­try giants such as Binance and OKEx and con­tribute to the flour­ish­ing blockchain com­mu­ni­ty in Mal­ta. All signs indi­cate that we will see a rapid increase in the imple­men­ta­tion of secu­ri­ty token offer­ings in the com­ing months. The Blockchain Island Mal­ta offers ide­al frame­work con­di­tions and is pre­pared for the upcom­ing STO boom.

About Philipp Sauerborn

In 2005, Philipp Sauer­born joined the firm of St. Matthew in Lon­don, one of the lead­ing Ger­man account­ing firms in Eng­land renowned for its exper­tise in cor­po­rate, com­mer­cial and tax law, as a depart­ment head. After three years, he was a part­ner and man­ag­ing direc­tor.
Towards the end of 2011, he decid­ed to move to Mal­ta, where he first worked at inter­na­tion­al law firms and con­sul­tan­cies in an employed and con­sult­ing capac­i­ty. Since the begin­ning of 2013, he has been a senior employ­ee at Dr. Wern­er & Part­ner. Mr. Sauer­born is cur­rent­ly com­plet­ing his ADIT ‑Advanced Diplo­ma in Inter­na­tion­al Tax.

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