European Union’s Prospectus Regulation to Shake Up the Security Token Industry

European Union’s Prospectus Regulation to Shake Up the Security Token Industry

On July 21st 2019, the European Union Prospectus Regulation will officially go into effect. The new law will be massively important for the STO sector since it outlines clear disclosure requirements for issuing and trading these tokens. 

A new age of STOs in Europe is coming. This summer, the European Union Prospectus Regulation will go into effect which will cause wave across the entire security token space.

The goal of the new regulation is to simplify existing capital market restrictions in the European Union. The end result is that it will be easier for emerging and smaller companies to access capital and investors.

The Impact on the STO Industry

Regarding the STO space, one of the most important aspects of this new regulatory prospectus is how it treats security issuers. Rather than drawing up legal documentation to investors, security issuers will now be exempt from these requirements. Now, a much less complicated (and less costly) memorandum will need to be issued. Moreover, direct interactions between regulators will even be minimized in some jurisdictions.

All issuers will be unable to raise more than 20M Euros over a period of 12 months across all member states, however.

However, the good news is that the new regulatory law institutes a new passport system. This means that once an STO is approved in an EU member state, it will be valid through the entire European Union. This allows STOs to be offered and traded across multiple markets within Europe without needing to start their regulatory filings from scratch.

The end result is a more unified regulatory landscape for the entire European continent. It is a change that is badly needed given the confusing nature of the current system. Many EU member states have already committed themselves to blockchain adoption.

Each EU member state will be setting their own limit for which a legal prospectus is not required for security token offerings. Austria, for example, is setting its limit at 5M Euros. Other countries, like Germany, have firmer qualifications required for selling security tokens.

Do you believe that the new law will allow for the EU to lead the world in security token offerings? Let us know your thoughts below. 

Image courtesy of the Council of Foreign Relations.