Comprehensive Multiple-Choice Questionnaire for Issuers
Table of contents:
This multiple-choice questionnaire is designed to help issuers of tokenized assets evaluate the legal feasibility, compliance requirements, and regulatory obligations before launching a Security Token Offering (STO). By answering these questions, issuers can assess their securities classification, tax implications, ownership and transferability, and licensing requirements across different jurisdictions.
Selecting the Issuance Jurisdiction
The first critical decision in tokenization is whether to issue security tokens from the domestic jurisdiction of the asset or to establish an SPV (Special Purpose Vehicle) or SPC (Special Purpose Company) in a foreign jurisdiction for regulatory, tax, or operational benefits.
Where will the tokenized asset be issued?
Domestic jurisdiction (same as the asset’s location) – The tokenized asset will be issued under the securities laws of the asset’s country using a locally registered SPV or SPC.
Foreign jurisdiction (different from the asset’s location) – The security token issuance will take place in an alternative jurisdiction with more favorable regulations.
Where will the SPV or SPC be incorporated?
British Virgin Islands (BVI) – Tax-neutral jurisdiction, widely used for real estate, funds, and investment structures.
Cayman Islands – No direct corporate taxation, commonly used for hedge funds and digital securities.
Liechtenstein – MiFID II and Blockchain Act-compliant, integrated into the European financial market.
Marshall Islands – Recognized for maritime and asset tokenization, offering flexibility for international investors.
Gibraltar – Established Distributed Ledger Technology (DLT) regulatory framework, supporting digital asset tokenization.
United States (Delaware, Wyoming, Puerto Rico) – Strong legal system with access to U.S. investors.
Other (Specify): ________________________
Choosing Between an SPV or SPC
The legal structure of the issuing entity determines risk isolation, asset segregation, and investor protections.
What type of issuing entity will be used?
SPV (Special Purpose Vehicle) – A single legal entity created for one specific asset or project. Best for real estate, private equity, or debt issuance.
SPC (Special Purpose Company) – A multi-asset structure that allows for multiple segregated portfolios under one legal entity. Best for investment funds, tokenized portfolios, and structured products.
Defining the Link Between the Issuer and the Asset
If the SPV/SPC is in a foreign jurisdiction, a legal connection must be established between the operating entity (the company managing the asset) and the issuing entity (the SPV/SPC raising funds through tokenization).
How will the issuing entity be legally linked to the asset?
Direct Ownership – The SPV directly owns the underlying asset, ensuring a straightforward structure.
Revenue Distribution Agreement – The SPV does not own the asset but receives income (e.g., rental revenue, royalties, or dividends) from the local operating company.
Asset Management Agreement – The SPV retains control over the asset’s operations while the underlying asset remains with the local company.
Debt Financing Agreement – The SPV provides a loan to the local company, and investor returns are based on debt repayments.
Other (Specify): ________________________
Securities Classification & Regulatory Clarity
How does the jurisdiction classify security tokens?
Clearly defined as securities under existing financial laws (Security tokens are fully regulated under national securities frameworks).
Considered financial instruments but subject to digital asset laws (Security tokens follow a hybrid legal approach with special tokenization regulations).
Unclear classification, legal uncertainty exists (The country has no explicit guidance on how tokenized securities are regulated).
Prohibited or heavily restricted (Security tokens cannot be issued, traded, or held under local law).
What registration or exemption requirements apply to security tokens?
Full securities registration required before issuance (Security tokens must be approved by the financial regulator before launch).
Private placement exemptions are available (Security tokens can be offered only to accredited or institutional investors without full registration).
No formal registration process, but regulatory oversight exists (Issuers may be subject to reporting obligations or compliance reviews).
No registration required, security tokens operate freely (The jurisdiction allows unregulated issuance and trading).
Tax Implications in Tokenization
How are capital gains from security token sales taxed?
High capital gains tax (above 20%) (Security token sales are heavily taxed, reducing investor profitability).
Moderate capital gains tax (10-20%) (Taxation applies but with allowances for long-term holdings).
Low or zero capital gains tax (The jurisdiction offers tax incentives or exemptions for digital assets).
Unclear tax policy (No specific taxation rules exist for security tokens).
Are income distributions (dividends, rental income) subject to withholding tax?
Yes, full withholding tax applies (Issuers must deduct taxes before distributing income to token holders).
Reduced withholding tax for foreign investors (Tax treaties allow lower rates for international participants).
No withholding tax on security token distributions (Investors receive full earnings without deductions).
Tax treatment is unclear (Uncertainty exists regarding income distribution taxation).
Ownership & Transferability in Tokenization
Can foreign investors legally own security tokens in this jurisdiction?
Yes, no restrictions on foreign ownership (Non-residents can freely purchase and hold tokenized assets).
Foreign investors are allowed, but government approval is required (Certain restrictions or regulatory processes apply).
Foreign ownership is restricted in specific asset classes (Tokenized real estate or corporate shares may have limitations).
Foreign investors are prohibited from holding security tokens (The country does not allow non-residents to participate).
Compliance & Licensing for Tokenized Assets
Is a VASP (Virtual Asset Service Provider) license required?
No, security tokens are exempt from VASP requirements (VASP laws apply only to crypto exchanges or custody services).
Required only if security tokens are actively traded on a blockchain (Applies when security tokens function as tradeable virtual assets).
Mandatory for all security token issuers (The jurisdiction requires a VASP license before launching tokenized assets).
Unclear or undefined regulatory stance (No clear guidance on VASP requirements).
Is a broker-dealer or Alternative Trading System (ATS) license required?
No, as long as the issuer is the only liquidity provider with KYC/AML enforcement (Single-issuer liquidity pools are exempt from brokerage laws).
Required only if third-party trading is facilitated (Applies when external investors trade via a regulated marketplace).
Mandatory for all security token trading (A broker-dealer or ATS license is required for any form of trading).
Unclear licensing requirements for security tokens (The country has no defined rules for secondary trading).
Conclusion: Ensuring Compliance Before Tokenization
By answering these multiple-choice questions, tokenization issuers can:
Assess legal feasibility, compliance risks, and regulatory obligations before launching an STO.
Determine the most suitable jurisdiction for token issuance, taxation, and investor accessibility.
Select the correct entity type (SPV or SPC) and define its legal connection to the asset.
Ensure that the security token structure aligns with ownership laws and transferability requirements.
Identify whether licensing, exemptions, or regulatory approvals are needed to legally issue and trade security tokens.
This structured approach ensures that the Security Token Offering (STO) is legally compliant, market-ready, and scalable across international jurisdictions.
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