The Bank of Lithuania has offered the much-needed clarification and guidelines on the comprehensive process of security token offering (STO), announced in an official press release of Oct 21.
Often regarded as the next step in token evolution, STOs are processes that are very similar to those of initial coin offerings (ICOs). An investor represents his investment by buying coins or tokens, also categorized as securities. Essentially, they instill credibility in many blockchain and cryptocurrency-related businesses and as such, demonstrate improvements over old-school ICOs.
The Bank of Lithuania thus deemed fit to issue necessary guidelines on STOs offer businesses means other than bank loans to raise capital. It has emerged as the first-ever financial institution to publish its perspective on STOs and clearing its stance on the ICOs.
Bank of Lithuania elucidates security token offering
Marius Jurgilas, a board member of the Bank of Lithuania, clarified that the focus is on streamlining the much-in-demand STO process that has taken over the diminishing interests in ICOs. The guidelines explain the directive rather than introducing new regulatory reforms. In an environment where ICOs and STOs are heavily scrutinized for compliance, these guidelines come in handy to avoid any misinformation or confusion, he explained.
While formulating the guidelines, the bank officials considered market participants’ suggestions and explained obscure points.
Bank to help firms with regulatory compliance
Organizations that wish to benefit from security token offerings will first be required to assess their assets and determine if they classify as regulated financial instruments. If so, they will be required to comply with the European Union as well as local regulations before commencing fund-raising activities.
In a situation where there is even the slightest ambiguity regarding the asset’s classification and regulations that govern it, the bank officials will lend a helping hand, Jurgilas affirmed.
Whether a particular product has the essential features for being called as a financial instrument, the bank will assist in applying relevant regulations offer guidance on how to comply, considering each case individually.
Thus, a market that is rife with illegal token offerings and cryptocurrency scams, these guidelines come as leading light to those who want to make the most of the emerging technologies and yet struggle to stay within the confines of the law.