New securities legislation opens the way for STOs to reach their true potential
The European Union recently unveiled a new suite of regulations for European securities, and they have big implications for the STO market. Not only could they make the sale of digital securities easier and cheaper, new rules governing the sizing of fundraising efforts could help keep rules intended for blockchain’s mega-projects from holding back its merely very large ones.
In all, the prospectus represents a major change in the way that securities are handled, and it will have a huge impact on the development of the EU’s digital securities market. Perhaps more importantly, North American and other authorities will be watching closely for any effect of these changes, and could use the EU as a template for their own future legislative proposals.
The New EU Securities Regulations, Explained
At a high level, the new regulations are simply about continuing to streamline the European Union’s notorious inter-state complexity, simplifying the entire investment space and making it easier for companies and individuals to stay compliant. However, there are some specific changes that will disproportionately impact digital securities.
First, any security looking to raise less than 20 million Euro in a single year will now be exempt from some of the most onerous regulatory requirements for the sale of securities. The new rules lower the required interaction with regulators during the sale of a security, and even drops the requirement to issue costly and time-consuming legal documentation to every investor. Now, a simple memorandum can be issued, greatly reducing the strain on company coffers. But only for securities sales below the critical size.
Additionally, the legislation makes the EU more legally cohesive, allowing any EU member state to approve a security (including a digital security) so that it can be sold throughout the EU. That will make Europe a vastly more attractive market for securities sales, providing the same or greater potential gains than traditional securities for potentially far lower startup costs.
Why These Changes Matter
The sale of digital securities has always been rife with uncertainty, and perhaps nowhere more-so than in the EU. By making their policies clearer and more unified behind a single standard, the EU is letting a wider array of potential investments enter the digital securities space.
The new rules could let digital securities be the definitive cost-cutting option that they were always supposed to be. Digital securities are only more open and egalitarian than traditional securities if they can make use of their inherent advantages in accessibility and potential liquidity -- but thus-far regulators have been acting as a pace-car, keeping digital securities offerings gated behind many of the same limiting factors as traditional IPOs.
Now, that looks to be about to change.
North America Should Follow Europe’s Lead
Digital securities have the potential to completely change the face of finance, and to give everyone access to the level of financial returns previously only available to the already-rich. In Europe, that’s already a huge advantage -- but in North America, where income and wealth inequality is even higher than it is in Europe, it’s becoming an absolute necessity.
North America’s securities market is the securities market for the world as a whole, and what North America makes its status quo tends to become baseline policy around the world. If and when the North American securities market embraces a simpler set of regulations, it will set the stage for the final, global revolution that cements digital securities as a legitimate sub-category of investment, overall.
Vanbex has just released the newest version of its Rocket token issuance platform, which adds the ability to launch a security token and the associated “security token offering” or “STO.” Combined with an evolved regulatory regime, perhaps patterned off the EU’s forward-thinking reforms, Rocket is just the sort of vehicle that can launch the security token market to its true, long-term potential.