Though tokens offering raises a lot of funds, they are not regulated. From the United States to Malaysia, no country had installed a token regulation by the 3rd quarter of 2018.
In the US, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are torn between classifying tokens as securities or commodities.
In China, security token offerings have been banned. The offerings have become landmines that issuers cannot go through with on their own. You need the right security token offering lawyers.
Security token attorneys are legal minds to help you decipher the entire security token issue process. They help you get answers to the hard questions and make everything right as you plan to fundraise. Here is a demonstration of why you need the right STO lawyers.
Why You Need STO Lawyers
One might ask the question, “Why STO legal experts?” To get it right, think of STOs as advanced but different forms of company IPOs (Initial Public Offering). The attorneys are experts who are trained to help token issuers get everything right and move their projects to the next level.
The process of issuing tokens is complex, and every component of the fast-evolving field has to be carefully factored in. Your STO attorneys will help to knit the pieces together so that your STO, project, development team, and management run smoothly.
Here are the main areas that should be addressed with the assistance of Blockchain lawyers:
- International legal compliance.
- ICO structuring.
- Best jurisdiction to incorporate the Blockchain project.
- Risk evaluation.
- Token pricing.
Lawyers Help To Define the Scope of STOs
STOs are considered as investment contracts that operate in a similar way to the traditional financial instruments. The STO attorneys will help you carry out the Howey test to get a clear definition of the tokens to be sold in the markets.
The securities tokens are virtual tokens native to specific blockchains but meet the definition of securities in US law. Your attorney will help you classify the tokens in different categories, including:
- Tokenized real estates.
- Tokenized works of fine art, boats, and luxury cars.
- Tokenized traditional securities.
- Tokenized profit sharing rights.
- Tokenized precious metals
Working with an attorney gives your tokens the needed legal basement to convince the target audience to invest their funds in your project. This definition can also help to lay the foundation for future operations when you want to grow the project or create a new structure to increase profitability.
Conceptualizing the benefits of STOs
The primary goal of running an STO is raising funds for a business. This is crucial in helping the
company meet its targeted goals. Whether it is opening new branches locally or expanding abroad, it will become easier with investors funds without borrowing from banks.
When you hire STO lawyers, they will ensure you also get the following additional benefits:
- Increased operational transparency and security.
- A highly simplified investor management company.
- Simplified access to investment capital.
- Articulate fractionalization of ownership.
- Prevention of legal setbacks, both locally and internationally.
- Help the project attract more investors
Understanding and Addressing Risks Emerging From STOs
Though STOs are becoming the most preferred method for businesses to raise capital, they are also very risky. Your lawyers will help to identify these pitfalls and methods of avoiding them.
Most of the STO related risks arise from failure to fully comply with securities regulations, so know your customer requirements, asset type, and related tax rules. Because security token lawyers work in the industry, they will help you craft a comprehensive STO strategy to guarantee the best results.
Good STO Attorneys Walk With You to Success
The process of issuing an STO is lengthy, tiresome, and expensive. To avoid failing on the way, it is essential to have an attorney on your side.
The attorney becomes your inspiration because every goal can be approached with extra confidence. Here are the main stages that the attorney will take you through to make the ICO successful:
- Comprehensive token analysis to make sure it is properly structured and premised in law. This will involve both a local and international law review to ensure that the STO can be accessed in as many countries as possible.
- Establishing the ideal corporate structure for the STO. The corporate structure of the STO will greatly determine its appeal to investors. Here, you want an appearing yet highly functional structure when the STO hits the market.
- Carefully analyzing the smart contracts to make sure they are accurate and unambiguous. This is very crucial because the contracts automatically implement the sales for every investor meeting the preset conditions. You might need to pretest the smart contracts.
- Crafting the private investment agreements, placement of the memorandum, and all legal documents. The attorneys help issuers craft binding agreements for smooth application and personal protection.
- Creating the know-your-customer policies and assisting clients to implement them to ensure that investors can effectively verify their identities and eligibility.
- Post STO support. Once the STO is over, the security token offering firms do not leave the clients. They continue advising them on things such as secondary trading issues, remittance, and tokens usage.
The Final Take
The success of an STO is dependent on how effectively it is planned. While you are the pioneer of the idea, the security token offering lawyers come in handy to help you perfect it.
Because the attorneys have been in the market and seen other projects grow, you need their input to perfect the STO structure and identify all the risks. The lawyers will walk with you to make sure that every agreement is implemented well.
To get better support, ensure to pick the best attorneys who are highly committed and have ample experience with similar projects in the past. Besides, you should bring the security token offering expert attorneys on early enough in the STO cycle to make everything smooth and more successful.
You want a successful ICO; make STO legal professionals your partners in the process.