Best jurisdictions for creating security tokens

Security tokens are regulated by securities commissions across the globe. The most active organization for Securities and Exchange Commission (SEC) is located in the US…

Security tokens and their issuance differs from the IPO algorithms with numerous variations and reporting standards, yet these implications are also in the scope of work of traditional securities commissions.

What’s the most sophisticated component of a securities deal? Most likely it’s the legal documentation. This involves mandatory disclosures and other filings, and the procedure will be different in US, Hong Kong, Singapore, Korea, or basically any other country. Don’t worry though: you’ll get through it with the right legal counsel and advisors.

In fact, there is no single jurisdiction that leads the game. The US has been making the most notable progress whereas Europe has been catching up quickly with security tokens issuance. Europe represents a steady regulatory environment and strong affinity towards tokenized assets. The key players here so far are Switzerland and Gibraltar.

The Swiss Financial Market Supervisory Authority (FINMA), for one, has come up with new principle-based guidelines. The document tends to dot the i’s and cross the t’s in a host of aspects such as the variety of token types and AML considerations. In fact, it provides a well-structured instruction for novice issuers on how to deal with regulators.

Generally, Switzerland is known for a number of perks that ICOs and security token players will appreciate:

• Economic and political stability
• The government supports blockchain and crypto startups
• The government issues and updates clear policies on a regular basis
• There’s a slew of state-backed crypto and blockchain events in the country
• Not to mention… a local Crypto Valley.

Gibraltar’s government is another European supporter of tokenization. They introduced an approach that would cater to “the promotion, sale and distribution of tokens.” The idea is to create a structured token-based secondary market and provide official advisory procedures for token sales within the jurisdiction of Gibraltar.

As Sian Jones, Senior Advisor to the Gibraltar Financial Services Commission (GFSC), put it: “We see blockchain and distributed ledger technology as a long game. We see this as something that will have an important and profound effect on trust relationships with both customers and enterprises, citizens and government, and therefore something which is highly sustainable.” Gibraltar officials are planning to elaborate with additional details later in 2018.

Gibraltar offers the following benefits to the token community:

• Active support for ICO
• GFSC has specific criteria on distinguishing between security and non-security crypto coins
• Auspicious business environment and low taxes.

We’ve mainly highlighted the positive tokenization processes in Switzerland and Gibraltar, yet there are plenty of blockchain hubs inside and outside of Europe. Other regions that are gaining a strong foothold in security tokens are the UK, Estonia, and Singapore. Check out the specifics of each jurisdiction and see which one suits you best. The token world is your oyster.