STO: issuing security tokens in Switzerland

A Security Token Offering (STO) is the issuance of tokens that embody financial rights — an equity stake, a dividend, a portion of debt, a claim on a cash flow. Unlike a utility token, you are not selling access to a service here: you are selling a security in digital form. Switzerland is among the most credible jurisdictions in which to do this, because its law explicitly recognises securities on distributed ledgers. But precisely because it is a security, an STO must be structured with the same rigour as a traditional issuance.

What sets an STO apart

The starting point is qualification under FINMA practice: if the token embodies a financial claim against the issuer, it is treated as a security. This triggers a set of obligations that do not apply to a pure utility token: investor disclosure, conduct rules in the placement and, depending on the case, a prospectus requirement. Calling it an “STO” rather than an “ICO” is not marketing: it describes exactly the nature of the instrument and the rules that apply.

The Swiss legal framework

The reform that introduced registered ledger-based securities (droits-valeurs inscrits) makes it possible to represent, on a distributed ledger, rights that previously required a paper certificate or registration with a custodian. In practice: shares, bonds and other rights can be tokenised with recognised legal effect, provided the ledger guarantees integrity, transparency and control by the entitled parties. This is the foundation that makes a Swiss STO more than a technological promise: the rights transferred via tokens are legally enforceable.

The elements of a well-structured STO

1. An issuing entity with real substance. You need an adequate corporate structure — capital, governance, functioning bodies. “Empty” entities pass neither due diligence nor banking.
2. Definition of the rights conferred. What the token embodies: a share of capital, a right to dividends, interest, priority on liquidation. It must be drafted so that the digital right corresponds exactly to the statutory or contractual one.
3. Disclosure documentation. Depending on the type of offering and the audience reached, a prospectus requirement may be triggered. Even where an exemption applies, coherent and verifiable documentation is needed.
4. AML safeguards. Identification of subscribers (KYC) and monitoring, handled through a supervised financial intermediary.
5. Ledger and custody. The distributed ledger must meet the legal requirements; custody of tokens on behalf of third parties is an activity in its own right.
6. Tax and accounting. The issuance has effects on the balance sheet, taxes and — where there are equity or debt components — on withholding tax and the treatment of proceeds. These must be planned before the placement.

Exemptions matter

Not every STO requires a full prospectus. Offerings addressed only to qualified investors, with a limited number of subscribers, or above a certain minimum denomination threshold, may benefit from exemptions. But exemptions must be verified case by case and documented: they are a structuring tool, not a shortcut for skipping the rules.

Where an authorised partner comes in

The placement of security tokens with the public, financial intermediation, the management of AML safeguards and custody on behalf of third parties are activities subject to authorisation. The rule is clear-cut: regulated activities go through an authorised partner. SIH ONE handles structuring and advisory — qualification, definition of the rights, corporate structure, documentation, tax and accounting coordination — while activities requiring a FINMA/SRO authorisation are carried out through authorised partners, until and unless the perimeter is formalised differently.

The right sequence

An STO starts from qualification and a precise definition of the rights, then builds documentation, safeguards and placement. Reversing the order — announcing the raise and only then confronting the securities obligations — is the most expensive mistake: if the tokens have been placed without the required safeguards, the legal exposure is real. The strength of a Swiss STO lies in the fact that the rights are enforceable: it is worth building it so that they truly are.

This content is informational and does not constitute legal, tax or financial advice. Crypto practice evolves: every issuance must be assessed on its specific facts.

Are you considering an STO to finance or tokenise your project? Let’s start from qualification and build a solid structure, with the right partners where authorisation is needed. Let’s talk.