ICO is presently developing towards STO and people taking notes of comprehensive guide to issue the secure token (STOs). STO (Security Token) is not just a compelling phrase. It actively reflects the movement of the ICO in the world as legally free since it must comply with well-established and enforced laws and regulations.

The main reason is that the managers’ awareness of the ICO as a loophole in the legal field raised funds and their desire to seal it, to protect investors and consumers. The tokens can be bought by the crowd as an investment and therefore, should be regulated. You should keep in mind that tokens could trigger all kinds of licensing requests in addition to compliance with securities laws.

For instance, a token that is not a security may still be considered electronic money, a payment service, or an alternative investment. The general rule would be conducting a legal analysis of your token and if the conclusion is that the securities procedure or other licensing process is necessary choose the country where you like to start according to the intended target market. Then, the jurisdiction to license and the securities law are wholly determined by the source of your customer.

The legal process that a securities issuer requires to undergo is without a license, rather than drafting the prospectus and being actively approved by the regulatory authority in the country of the issuer’s choice. So requesting the prospectus is a rule, some exemptions are exceptions. Moreover the exemption actually means that you are selling the security, but by pre-defined rule, we sell publicly (‘retail’).

Will your token a payment instrument?

To be regarded as a payment instrument, your token must generally work as a form of payment, but not a form of obscurity. The token would require permitting the buyer to purchase the token. The product or service uses it from the first day. If your token is only a payment instrument, it would not be a securities law, but it could be considered electronic money or payment services.

The key feature other than the uncontrolled payment token from electronic money or payment service would be legal relationship between the coin owner and the issuer. So when the issuer is responsible for coin owners, for instance, to buy coins, it actually means that licensing is needed.