Establishing a Legal Entity for Token Issuance

A Special Purpose Vehicle (SPV) or Special Purpose Company (SPC) is required to issue and manage security tokens, ensuring legal and financial separation between the tokenized asset and the issuer’s other business operations.

Key Considerations for Establishing the Legal Entity

  • The entity must comply with securities laws in the chosen jurisdiction.

  • Know Your Business (KYB) verification is required to confirm the legitimacy of the issuing company.

  • The entity structure impacts taxation, liability, and investor protections.

Entity Types for Token Issuance

  • SPV (Special Purpose Vehicle) - Used for single-asset tokenization, ensuring direct legal ownership over the asset.

  • SPC (Special Purpose Company) - Suitable for multi-asset tokenization, where each portfolio (sub-fund) is legally separated.

  • Tokenization Trust - Used in jurisdictions where SPVs or SPCs are not ideal, ensuring secure asset management on behalf of token holders.

Why This Step Matters

  • Provides legal protection and operational clarity for the issuance of security tokens.

  • Ensures compliance with anti-money laundering (AML) and securities laws.

  • Establishes trust with investors by verifying the legitimacy of the issuing entity.

By structuring the token issuance entity correctly, issuers create a legally compliant, investor-friendly, and operationally efficient tokenization framework.

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