Previously, entities wanting to tap the capital markets without raising debt could only do so through private equity or initial public offerings (IPOs). In particular, the latter entailed satisfying legal requirements in terms of initial capital and banking. This new era of Crypto and Blockchain has provided us with a new, innovative method of raising capital by launching an initial coin offering (ICO) or security token offering (STO). Billions of euros have been successfully raised to raise capital to launch ICO and STO projects, and the STO route has gained a lot of traction over the last few months.
Once soft caps are reached and token issuers can go forth with their ICO projects, issuers need to make good on their promises regarding the value and benefit of owning and using such tokens by following through with the path laid out in the Whitepaper within the stipulated time frames. This is why it is important for persons buying tokens to perform due diligence on the brains behind the teams offering these tokens, just as one would do background checks on a company offering equity through an IPO.
The most important, and some would say only, marketing tool for coin or token issuers is a Whitepaper (for ICOs) or Prospective paper (for STOs). If an issuer decides to launch their ICO/STO from a regulated jurisdiction such as Malta or Switzerland their Whitepaper of Prospective paper would need to meet regulatory requirements in order for the relevant regulator (for eg MFSA in Malta) to approve and register the Whitepaper or Prospective paper and concurrently licence the activity of placing the token or coin on the market. Notably the applicable legislation regulating ICOs and STOs differ in Malta due to Malta’s token classification system. For example the applicable legislation security tokens are subject to is the EU directive MIFID. Teams pursuing offerings in either form would need to include in their Whitepapers important components such as details of the token issuer and their advisory team, soft and hard caps, Wallet Security, AML & KYC c...
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