Introduction: What is Tokenization?
Tokenization is the process of converting an asset into a token on the blockchain. It operates by dividing—or fractionalizing—the ownership of an asset (whether the asset is a piece of real estate or entire property, a building, artwork, and so on) into digital tokens. These tokens are then offered to investors in an Initial Coin Offering (ICO) or Security Token Offering (STO). Investors can purchase a token—or ownership share—in the digital asset. The funds are typically used to support regular business activities or expansion plans of the business. That said, the overall tokenization process is intricate and can involve many regulatory issues and reporting obligations. This article, drafted by the blockchain attorneys at Oberheiden, P.C., outlines how an attorney can help you with your tokenization project.
5 Reasons You May Need a Tokenization Lawyer
Tokenization projects involve multiple regulatory regimes such as the federal securities laws, money transmitting laws under the Bank Secret Act (“BSA”), and tax reporting issues, as some examples. We list and explain five reasons why individuals may need a lawyer for their tokenization project.
1. Tokenization projects—regardless of the asset to be tokenized—are a complicated and multi-step process that often demands the experience of a tokenization attorney.
A successful tokenization project involves multiple steps. At every step, you have to assess whether you have compliance obligations under federal law. For instance, at the outset, designing your token will directly impact whether you will have to register your token as a “security.” You will also need to design your token with your business’s particular goals in mind. This includes issue price, intended purpose, function, transferability, and so on. Other factors that directly impact the token and success of your business include marketing efforts, terms of issuance, target audience, and…
