The Luxembourg Stock Exchange has decided to allow security tokens to be registered on its Securities Official List (SOL).
This admission takes place within a bigger context marked by the momentum of market digitalization using blockchain technology, notably through the imminent adoption of the European Union Pilot Regime, which will authorize the processing of security tokens through market infrastructures in compatibility with related EU regulations within a transitional period.
Native security tokens issued on DLT (Distributed Ledger Technology) enable a fully digital issuance process and lifecycle.
What are security tokens?
Security tokens are clarified by the Luxembourg Stock Exchange (LuxSE) as “financial instruments that are issued and exist on a distributed ledger, allowing for a fully digital issuance and servicing process” that provide similar advantages to the more formal financial instruments and have the potential to boost efficiency and transparency making transactions safer and more resilient.
The benefit of registering security token in Luxembourg
Listing Security Tokens on SOL could have specific incentives and benefits for issuers, such as the following:
- The public display may increase the visibility of the Security Tokens and invite investors.
- The registration may also promote the dissemination of meaningful price and securities data, which will be illustrated.
Security Tokens Scope of application
Given the intricate nature of these tokens, the admission of security tokens to the Securities Official List (SOL) is subject to the following standards:
- Only skilled issuers or those with a valid track record who are issuing debt financial instruments can be admitted to the Securities Official List (SOL).
- These securities must be priced in fiat currency.
- To be registered on the Securities Official List (SOL), offers of the DLT (Distributed Ledger Technology) securities must be restricted to qualified investors or allocated in wholesale denominations.
Information regarding the issuance of DLT (Distributed Ledger Technology) Financial Instruments
In the case of DLT (Distributed Ledger Technology) Financial Instruments, the Information Notice should contain the following extra information.
- Details on the DLT Financial Instruments regarding the procedures described in the terms and conditions of the securities carried out in an automated way within the DLT environment and the DLT utilized.
- Confirmation that a contingency protocol exists ( in case of a failure in the DLT ) and enables to identify the holders of the DLT Financial Instruments in case of such failure.
- A written and stimulated confirmation that the DLT Financial Instruments is authorized as Securities under the governing law of the DLT Financial Instruments.
- Illustration of the parties included in the issuance, the safe-keeping, the recording, the transfer, and the confirmation of the DLT Financial Instruments.
- Details of the payment process if such process includes the transfer of Settlement Tokens.
- Details of the risk factors associated mainly with the DLT Financial Instruments, the settlement procedure, and the underlying DLT.
- Environmental considerations on the DLT utilized.
Conclusion
Although the trading of Security Tokens on regulated stock exchanges still faces major legal challenges, the constant momentum in this area gives assurance about the future of financial instruments and blockchain technology.
If you need further details on SOL or needed help with your investment in Luxembourg, let’s go ahead and contact your Damalion expert now.
