by Frederik Bussler, Security Token Alliance Founder
Digital securities, or securities on the blockchain, are a tricky subject.
Technically, they promise to improve upon traditional securities at virtually every level: Compliance, liquidity, efficiency, and so on.
Legally, however, they’re subject to the purview of financial regulators, making the jurisdiction within which they operate a critical point to any potential issuer or investor.
In the US, for example, selling digital securities, such as through a Security Token Offering (STO), is extremely difficult, involving complex and legally ambiguous compliance on a state-by-state basis, similar to the process of a traditional IPO, rather than their un-regulated ICO counterpart.
Other jurisdictions recognize the (largely untapped) potential of digital securities as a boon to the local economy, as they incentive both investors and entrepreneurs. One jurisdiction leading the way is Malta, which recently hosted the Malta AI & Blockchain Summit, home to thousands of attendees championing the discussion on digital securities.
The reason that Malta is such a powerhouse for digital securities can be summarized with this article, which describes their proposed regulatory framework for Security Token Offerings. Even on just a symbolic level, the fact that the Malta Financial Services Authority went so far as to publish such a paper is a sign that they’re leagues ahead of most other jurisdictions in this area.
This decreases the legal risk for an issuer, because at least they have a framework to go by, while in most jurisdictions, doing an STO is a legal shot in the dark that, for all you know, could be a shot at the regulators.
While we’re still in the nascence of the digital securities industry, it’s hard to say which jurisdiction is the best in the world for an issuer or investor, but Malta has taken steps to secure its position as a top contender.
As discussed in this article by Digital Asset Live, other potentially strong jurisdictions include Switzerland, the Cayman Islands, and Singapore.