Crypto Funds

The Security Token Offering (STO) has initially replaced the Initial Coin Offering (ICO) and represent the issuance of a security token in order to raise funds from investors which will receive in return dividends, interest rates, staking rewards or additional tokens in the company.

Security tokens are smart contracts linked to different type of underlying assets including equity and debt financial instruments as well as funds and also real estate investment trusts.

Security token have more credibility than their crypto counterparts since they have to pass a Howey's Test, which was developed by the US Supreme Court in order to assess if a transaction could be considered as a form of investment contract.

Whether a certain investment is considered a security is important, because designation as a security means that the investment is subject to certain registration requirements.

In general, all securities offered in the public must be approved by a financial regulator, although there are some exceptions (for professional clients for example, when the notes have a value of more than 100 000 Eur,etc)

A company offering tokens which are considered as security tokens has to follow the same rules as if it was issuing securities (shares or notes).

A token is usually considered as a security token using the Howey Test, ie a transaction is an investment contract if:

1.It is an investment of money

2.There is an expectation of profits from the investment

3.The investment of money is commingled into one enterprise

4.Any profits is derived from the efforts of a promoter or manager

Utility tokens are not security token as they are related to a provision of services.

Blockchain is the first radical technology innovation of the 21st century. It provides a secure ledger system which is distributed across various network participants. This provides a highly secure accountancy system which is hardened against unauthorised use and advantages as:

Security: Blockchain aims at increasing the security of the system from hacking and fraud.

Easy to use : It provides an easy mechanism to allow users to securely transfer the currencies or assets between them and facilitates easy audit of user accounts.

Flexibility: Using a blockchain technology does not mean that the system will need to be a public ledger or open system if this is undesirable. It can be restricted to some users.

Privacy: The system may remain totally private if desirable. There are key differences between public and private blockchains .

Accounting : Blockchain provides a powerful accounting/auditing layer.

Malleable technology: Blockchain assets are currently unregulated, helping minimize management costs and expand the possible user base and distribution channels.

Any Assets can be placed on Blockchain :

• a security, (bonds, shares, funds, warrant, options, etc)

• a currency, (or a crypto currency)

• a movable asset, (car, plane, boat, etc)

• an intellectual property right or even

• real estate.

They can all be held by a securitisation Special Purpose Vehicle. (SPV)

This SPV can then issue “Token” which  is a debt security which can be traded in a blockchain (private or public).

Once the Token is issued it can be traded on a stock exchange or transferred to any participant to this exchange.