Initial Coin Offering, Security Token Offering

Published date15 September 2021
Subject MatterFinance and Banking, Corporate/Commercial Law, Financial Services, Securities
Law FirmKalo & Associates
AuthorKalo & Associates

While the use of DLT-based financial services is rapidly transforming the whole picture of financial markets for both market investors and market infrastructure providers (payment systems, stock exchanges, trading venues, securities custodians, issuing companies), these raise specifically challenges for both regulators and market participants due to the uncertainty on how the existing regulatory framework can be applied toThe Law "On financial markets based on the technology of Distributed Ledgers", (the "Law") in additional to what we have explained thus far, also regulates two very important steps for the system organization and functioning, in particular the Initial Coin Offering ("ICO") and the Security Token Offering ("STO").

In simple words, the Initial Coin Offering is the cryptocurrency industry's equivalent to an initial public offering (IPO) whilst the Security Token Offering is a type of public offering in which tokenized digital securities, known as security tokens, are sold in cryptocurrency exchanges, or security token exchanges. The Law applies to STOs and ICOs issued by an issuer in or from Albania. An STO or ICO is considered to be launched in or from Albania, if the issuer is an individual/entity registered in Albania (according to the definition of the Law).


Initially ICOs were the first crowdfunding option to surface in the Blockchain ecosystem. This method of fundraising enabled anyone, from anywhere, to finance the development of a company or project. In exchange for their investment, the investor will receive a number of utility tokens, or, user tokens in other words. These tokens represent future access to a company's product or service. There's no entry barrier for neither sellers nor buyers, it's open to crowd investing. Once the ICO is launched and has a defined timeline, the investors can buy the tokens. Compared to STO, it's a short-term investment. The teams have the liberty to use the funds in the way they deem most beneficial. Later, the tokens are distributed in a simple automated way via smart contracts1.

The Law defines ICOs as: "...method for raising funds, different from an STO, in which a Digital Token and/or Virtual Coin issuer offers them in Albania or abroad, in exchange for capital, in accordance with this law". When the offer to the public is expected to have a total equivalent value of, or higher than 8,000,000 (eight million) euros or the equivalent of this amount in ALL, within a period of 12 months, inter...

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