Lithuania Issues STO Guidelines, says “STOs are Taking Over ICOs”

The Bank of Lithuania has issued guidelines to improve regulatory clarity and investor protection when it comes to digital assets. The Bank says digital assets which have features of financial instruments— such as security tokens— must abide by both European Union (EU) and national legislative requirements.

Lithuania and Security Token Regulations Explained

Back in 2018, the Bank of Lithuania published guidance on the use of Initial Coin Offerings (ICOs).

Now however, Lithuania says the regulatory compliant Security Token Offering (STO) is replacing the ICO, which prompted the Bank to issue updated guidelines on STOs.

According to Marius Jurgilas, Member of the Board of the Bank of Lithuania,

“The current focus on security token offerings (STOs) is taking over the waning interest in initial coin offerings (ICOs). Businesses are interested in this particular way of raising capital as an alternative to bank lending. The Guidelines on Security Token Offering are aimed at explaining our position in this regard rather than creating new regulatory arrangements. In a strict regulatory environment, such as the securities market, it becomes crucial to set rules in order to avoid any miscommunication, misunderstandings and their consequences.”

In the majority of jurisdictions across the globe, STOs constitute regulated securities offerings. STOs are thereby subject to their respective jurisdictions’ existing securities laws.

This is the case in Hong Kong for example, just as it is in the U.S.— where SEC Chairman Jay Clayton has publicly stated nearly every ICO he has seen, constitutes a securities offering.

The Bank of Lithuania is issuing guidelines in an attempt to mitigate future problems with digital token issuers.

Companies that plan to leverage the benefits of STOs will have to recognize their assets as regulated financial instruments and therefore comply with both European Union and national legislation concerning capital-raising activities.

The Bank of Lithuania has therefore opted to follow the major jurisdictions throughout the globe. The appropriate regulations will apply to financial instruments (such as securities) regardless of the asset’s underlying technology— to include the blockchain.

The Bank will nonetheless stand by to provide guidance for specific cases. Jurgilas continued,

“In case market participants are not sure whether their offered tokens are subject to regulation, we stand ready to provide them with consultation on this matter.”

What do you think about Lithuania’s guidelines on Security Token Offerings? Let us know what you think in the comments section below.

Image courtesy of The Industry Spread.