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TokenizEU – Wrapping Up Or What’s Next?

As winter is approaching, it’s getting dark and cold here in Estonia. Pretty much how we would describe the current STO market. Not much has changed in the last six months – there are some offerings, but nothing spectacular in regards of increased adoption. We are not surprised, it’s a regulated market and nothing happens quickly. There aren’t too many exciting STOs out there, though it’s interesting to see that German BaFin, one of the most respected financial authorities in the EU, has approved several STOs of which investment documents, at least the English versions, weren’t overly well written (in our opinion).

Similarly to the STO market,  there have been no updates from our side at TokenizEU (apart from launching the ProspectusApp). Although we have proposed a legally viable way of tokenising securities (via depositary receipts), it hasn’t turned out to be a solution that would actually make raising capital in Europe any easier. If anything, tokenising adds another layer of complexity and reduces the chances of getting the prospectus registered with the authorities. If you’re raising capital below the financial thresholds, getting the prospectus registered is not a problem ( it’s not required). As our idea is to be a partner to SMEs who are looking to raise more than 5m euros and to do that via public offerings, these exemptions do not apply to us.  Hence, we’ve been working on a legal structure which would make us a hybrid of an Investment Firm and a Fund Manager. This solution would give us a full control over the issuance process. The slight downside is the need of having some laws amended. While the people from the ministry are super supportive, it’s not a quick nor easy process to change the regulations (given that these changes wouldn’t conflict with the EU laws in the first place, which is also unclear and a matter of interpretation). How the saying goes – best things are complicated (ha-ha). Well, no one said it has to be easy.

Therefore, it’s likely there won’t be any updates from our side for time being. We keep giving legal support to our clients, but that’s how far our current capacity goes. We also want to avoid being delusional – there’s no sense of doing something just because we’ve invested time, money and energy into it. Sometimes it’s smart to let go and try to find another angle or approach. Our goal is to have clarity by the end of this year. Clarity of what’s doable and what is not, and if there’s no clarity nor any Black Swan events that will change our direction or the whole state of the STO market, we may very well put a stop to this adventure in its current form. Will wait and see.