The Bank of Lithuania has issued the Guidelines on Security Token Offering which provide greater regulatory clarity and aim at higher investor protection.
The Bank of Lithuania has become one of the first market regulators in the world to issue guidelines on STOs. Previously, it has also published (and later updated) its position on ICOs.
Setting forth the regulatory approach of the Bank of Lithuania to tokens as a financial instrument, the new Guidelines focus on their classification (what tokens should be categorised as having features of securities or other financial instruments), assess specific cases, provide recommendations related to the issue of security tokens and clarify applicable legal regulation.
Companies planning to use the STO method for issuing tokens qualified as transferable securities or other financial instruments will have to comply with EU and national legislation regulating capital-raising activities.
“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,” said Mr Jurgilas. While drawing up the Guidelines, the Bank of Lithuania initiated two public consultations with market participants, took into account some of the received suggestions and provided the needed explanations.
The Bank of Lithuania has decided to take a technology-neutral regulatory approach, which means that if a certain product will have features of a financial instrument (e.g. securities), it will apply relevant regulation and supervision regardless of the technology used in its creation. Given the unique nature of this product, each case will be considered individually, while taking into account the substance over the form.