Is Germany’s First Regulated STO a False Start or Starting Gun?
Small business loan company Bitbond is raising €3.5 million in a Security Token Offering (STO) to support SMEs in Asia. This marks the first STO in Germany to be approved by regulatory body BaFin.
Bitbond Launches First Regulator-Approved STO in Germany
As a small business loans provider, Bitbond has already facilitated over €13 million in business loan volume supporting SMEs using eCommerce platforms, like eBay, Amazon, and Etsy.
The money from this STO will be invested in loans to help SMEs and online retailers in Asia succeed. Bitbond’s is the first STO in Germany to have its prospectus approved by the German regulator BaFin.
The platform currently supports over 150,000 users in 80 countries using blockchain technology to facilitate cross-border payments and machine-based learning for efficient credit-scoring. Radoslav Albrecht, Bitbond’s Founder & CEO told Bitcoinist:
We are still in the process of uncovering the potential of emerging technologies like blockchain and machine learning, so it’s exciting to be at the forefront of this developing space.
Why This Is the Starting Gun for STOs
The fact that German regulators are on board with digital securities offerings is significant. Blockchain technology could serve to unlock capital for small businesses all over the world. Albrecht explains:
The traditional financial system is acting as an obstacle for countless entrepreneurs across the world. With this STO, we will continue to offer accessible loans to the small business that need them, so that they can grow and invest in their own communities in turn.
Many businesses are already benefiting from the platform. Dr. Joemar Taganna, a bioengineer, received a business loan from Bitbond to help launch his software development business SciBiz. He enthused:
It’s much easier to secure a Bitbond loan than more traditional routes to seed finance. There’s a lot less hassle, which makes it quicker to launch a business and achieve sustainable growth.
This STO will run until July 8th and is open to investors around the world–except for the U.S., of course.
Why This Is Another False Start
The first regulatory-approved STO in Germany shows progress being made in Europe, however, the U.S. continues to drag its heels.
Many industry thought-leaders predicted the approval of a Regulation A+ security token offering (STO) to be on the cards this year and Blockstack’s world-first filing appeared to be the starting gun.
A Regulation A+ will be a great milestone for the industry. But, in the U.S. there’s a major stumbling block holding companies back: the need for a ‘Transfer Agent’.
The SEC mandates that issuers conducting a Tier ll offering under Reg A+ must engage the services of a stock transfer agent. He or she must be registered with the SEC as outlined in Section 17A of the Exchange Act unless 12(g) exempt.
A section 12(g) exemption is very difficult to accomplish. It requires an offering to have less than 500 non-accredited investors and no more than 2,000 investors of all levels. The company conducting the offering must also have less than $10 million in assets on its balance sheet.
Blockstack is not engaging a Transfer Agent despite the mandate that issuers must engage one.
Is There Any Hope for STOs in the U.S.?
CEO of STO advisory firm Horizon Globex Brian Collins maintains that one of the main reasons Reg A+ STOs haven’t been approved yet is the failure to use a Transfer Agent.
His company has built what it believes to be the first regulatory-compliant product for U.S. companies to initiate STOs. He says:
We anticipated the impending Regulation A+ digital securities offerings, which is why we developed a solution to equip Transfer Agents with the necessary technology to compliantly custody digital securities. We hope that our solution provides a missing puzzle piece for Regulation A+ digital securities offerings to be qualified.
If we could combine the attention and deal flow that ICOs generated, high-quality deals, and necessary regulation and investor protection, both the blockchain industry and Reg A+ industry would benefit significantly.
So is there any hope for STOs in the U.S.? Like everything with regulation in this industry, it all seems to hang on one very small yet important word: “if”.
Will STOs ever achieve the success of ICOs? Share your thoughts below!
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