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Dilendorf Khurdayan, a legal consulting group for the blockchain space, and EnToro, a fintech company, have released a primer on tokenizing equity. The report documents the benefits, risks, and practical considerations for the emerging space.
Traditionally issued equity is one of the prime candidates to be tokenized in the future. Similar to IPOs, digital security offerings will allow companies to crowdfund their projects on a level never before possible. Blockchain projects like Neufund, for example, have emerged as platforms specifically dedicated to equity fundraising on the blockchain. Digital banking platforms like Atomic Capital have been successful in raising millions in their own tokenized equity sales which shows that there is sustained interest in this option for investors.
Dilendorf Khurdayan has positioned itself as one of the leaders of legal questions within the tokenized security space and, together with Entoro, they have written a post explaining the case for its necessity and why it is preferred to traditional models.
According to the blogpost, tokenized shares “allow considerable flexibility in designing shareholder rights.” Preferred shares coupled with blockchain make access to capital easier and on a global scale 24/7.
The legal considerations for digital equity sales, however, must be kept in mind by issuers. These considerations include:
The report goes into detail on each of these steps in their expanded blogpost which can be read here.
What do you think of the legal situation for security token issuers? Do we need dedicated law firms to streamline this process? Let us know your thoughts in the comments.
Image courtesy of Dilendorf & Khurdayan.