Where Are the Best Jurisdictions For Creating Security Tokens?

12 March 2019

With the crypto-market evolving at a rapid rate, what are the top jurisdictions in the world for start-ups to create security tokens?

Security tokens are regulated by various security commissions around the world, with the most active one being the US-based Securities and Exchange Commission (SEC).

But does this make the United States of America the best jurisdiction for STOs?

Not necessarily. While it’s definitely a viable option due to its speedy evolution, growing market demand and accessible guidance, there are a lot of other alternatives right on our doorstep in Europe.

The importance of choosing the right jurisdiction

Before a start-up jumps in and launches an STO, it’s important to understand the specific regulatory implications of each jurisdiction.

If a start-up makes the wrong decision, this could impact the direction and formation of the company, the taxes that apply, plus how much compliance related-stipulations are going to cost them.

And with the landscape of cryptocurrency, blockchain technology and new regulations constantly changing, a start-up must be robust enough and willing to be flexible to adapt within its early stages of existence. Otherwise, the harsh reality is that it’ll probably fail to make it past its first-year anniversary.

While we are assessing the real impact of the new law passed recently by the Luxembourgish lawmakers, here are three of the best European jurisdictions every start-up must consider.

Switzerland

The Swiss Financial Market Supervisory Authority (FINMA) has positioned Switzerland as a powerhouse among the world of security tokens due to its favourable principle-based guidelines. In fact, it gives newcomers an extensive guide on how to deal with regulators.

Furthermore, Switzerland is widely known for its economic and political stability, plus its government’s well-documented initiatives designed to develop the blockchain ecosystem and support crypto start-ups.

As a jurisdiction, start-ups can also benefit from the ongoing policy recommendations and frequent events organised especially for crypto and blockchain-related businesses.

Gibraltar

Despite its population only surpassing the 30,000 mark, Gibraltar is establishing itself as one of the best upcoming destinations for Blockchain-related projects.

Not only does its government actively encourage ICO start-ups, but its also seen as a favourable environment for businesses to thrive due to its relaxed laws and fantastic taxation rates.

What’s more, the Gibraltar Financial Services Commission (GFSC) has created specific criteria to distinguish security and non-security crypto coins, which is another plus point for start-ups.

The senior advisor to the Gibraltar Financial Services Commission (GFSC), Sian Jones, said: “We see blockchain and distributed ledger technology as a long game.”

“We see this as something that will have an important and profound effect on trust relationships with both customers and enterprises, citizens and government, and therefore something which is highly sustainable.”

Estonia

Another leading jurisdiction in the European Union (EU) is Estonia. Like Switzerland and Gibraltar, they actively encourage the development of start-ups within the digital economy and have an open attitude towards the blockchain industry.

This point was highlighted when they become the first country to offer e-residency, making it possible for start-ups to create a company online and manage it from a remote location.

The freedom from taxation and the presence of any evasive regulations by the country’s Financial Supervision Authority (EFSA) are also worth noting too. Unless exceptions apply, start-ups are required to register an usually detailed prospectus before starting any STO.

Do you agree with our choices? If you need any help choosing a country to launch an STO in, get in touch with us and we’ll guide you through every stage.

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