In recent years, companies in a variety of industries have begun to expand their products and service offerings to include what is broadly referred to as tokens. These can come in two different forms: utility tokens, which as the name implies, can be used to purchase assets within a company's platform or ecosystem; and security tokens, which are regulated by the Securities and Exchange Commission (SEC) and are recognized as investments that can be exchanged for non-digital assets. If your company is interested in offering or selling a particular security token, the hurdles you'll need to jump over are collectively referred to as a Security Token Offering, or STO. For this process, you'll almost certainly want to hire attorneys who specialize in STO; below are some of the biggest advantages of doing so.
Determination of Security Status
First and foremost, attorneys will utilize their knowledge of United States law to determine whether your token offering can in fact be classified as a security. This is a lengthy process involving not only extensive analysis of the token itself, but how the token operates within the standards and regulations set forth by the SEC. Because security tokens are a relatively new concept, the legal minutiae can change from month to month, meaning that attorneys who specialize in security law are the only ones able to accurately assess security status at any given time.
Screening of Investors
A client may, understandably, get so wrapped up in the details of the tokens themselves that they neglect to focus on the investors to whom they are offering said tokens. But attorneys who work on STOs know that a major part of the offering process is making sure that investors meet basic standards. This involves screening potential investors through Anti-Money Laundering (AML) laws, as well as verifying their identity and financial information. Even a basic STO cannot go through without first having sufficient knowledge of who is planning to invest.
Handling Post-Offering Issues
Even after a security token is officially offered to investors, that doesn't it mean it is necessarily smooth sailing from there. If there are any issues with investor trading, re-structuring, or updated laws, for example, STO attorneys can continue to lend their knowledge to clients in need. In this way, they serve as a crucial go-between for clients and investors to ensure that both stability and trust are prioritized throughout, and beyond, the initial offering.