ABSTRACT
This chapter investigates the legal and regulatory issues relating to security token offering (STO), a regulated form of initial coin offering (ICO). Embedding securities token offering (STO) within a law and a regulatory framework is critical for its market to develop with investor confidence. The UK’s Financial Conduct Authority (FCA) current laws and regulations, which were designed for the initial public offering (IPO) market, are assessed for suitability in an STO market that aims to bring investors closer to issuers and to increase access to finance. UK Company law is then used as a framework to identify risks to investors’ economic (cash flow) and political (governance) rights. The analysis provides guidance for developing smart contracts to implement STO and fulfilling investors’ rights. The findings show the extent to which a self-governing organisation through code-as-law is possible. Finally, the author examines investors’ data rights and argues that they should be recognised as both an economic and a political right. Data dividends should be distributed to security token holders and data governance should ensure that centralised management does not monopolise information to influence token holders’ decision making.
Keywords: STO, crypto-assets, Market Abuse, corporate governance, data protection, investor protection
