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Security Tokens Offerings / Security Token Offerings and Opportunities for Real Estate Developers

1.) What are the security tokens?

• Security tokens are financial instruments that are issued in a distributed ledger technology (DLT), enabling a fully digital issuance and servicing process. Due to their innovative features, tokenised securities have the potential to significantly increase efficiency and transparency and enhance the security and resilience of transactions - all while providing benefits similar to traditional securities.

2.) What are the benefits for a potential security token issuer?

• a) Improving liquidity and raising funds for a specific project,
• b) Unlocking capital - attracting investors from around the world,
• c) Digital securities markets - 24 hours a day, 7 days a week,
• d) Transparency, security and efficiency in the execution of transactions,
• e) Fractional ownership - low upfront capital for investors.

3. How can "security tokens" be issued?

On February 24, 2022, the European Union adopted the EU Regulation on a pilot regime for market infrastructures based on distributed ledger technology (the "DLT Regulation").

• DLT Regulation introduced a DLT financial instrument. A DLT financial instrument is a financial instrument that is issued, recorded, transferred and stored using distributed ledger technology (blockchain).

• On the basis of Article 18 of the DLT Regulation, the scope of financial instruments within the meaning of MIFID 2[1] is extended to include financial instruments issued through distributed ledger technology, i.e. also securities tokens operating on blockchain technology.

• On 24. 04. 2024, an amendment to the Securities Act was approved, according to which financial instruments within the meaning of section 5 para. 1 of the Securities Act will also be considered financial instruments issued through distributed ledger technology. Thus, also transferable securities such as shares or bonds based on DLT technology. Most of the amendment will be effective from 01. 06. 2024, except for some points which have been postponed to 01. 01. 2025.

• As a result of the above, it will be possible to issue and subsequently trade securities tokens based on DLT technology (e.g. also real estate tokens - the possibility of splitting real estate into digital securities tokens) as financial instruments on the secondary market, i.e. the security tokens will be able to be listed with a central securities depository, as well as offered/distributed also through stockbrokers, banks as other financial instruments, subject to the conditions imposed by the applicable legislation regulating financial instruments (Securities Act, Collective Investment Act, etc.).

• In the EU, companies are gradually starting to use this way of raising funds. For example, major players such as the World Bank (International Bank for Restructuring and Development), Société Générale, the European Investment Bank have registered securities tokens on the Luxembourg Stock Exchange.

4. Our legal services

Scope of legal services:

• a) Preparation of the action plan, including preparation of a detailed legal opinion assessing the various aspects of the project,
• b) Implementation of the plan,
• c) preparation of contract documentation and
• d)representing the issuer before public authorities and third parties.

Moreover, in addition to the possibility of providing the above scope of services in Slovakia, we offer the possibility of providing the same scope of services in Austria and the Czech Republic, where similar legislation applies