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Digital Securities

A Global Perspective – Europe Edition

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A Global Perspective

With the year, and decade, coming to a close, we at thought it prudent to gauge industry sentiment as it stands.  What is the current state of the digital securities sector?  Is it better today than it was yesterday?  Maybe those ‘in-the-know’ feel as though strategic work still needs to be done.

These are all queries that many may have, including us as  With this in mind, we have reached out to various representatives within the sector.  Each hailing from differing regions of the globe.

The following commentary sheds insight into their thought processes, and how regulatory environments may shape market perception.


Africa, Asia, Europe, North America, and the United Kingdom are the regions which we have decided to look at, on an individual basis.

The following companies and their leads have taken the time to share their thoughts.

This edition will focus on Fintelum (EU), with subsequent entries into the series being published in the coming weeks.

Penny for your Thoughts?

Our methodology was simple – ask the same 5 simple questions pertaining to digital securities to 5 CEO/Managing Directors from around the world.

The goal? Gain insight into the variances in perception and adoption of the sector based on geography.  Something we feel is an important metric, given the potential of the sector to influence FinTech on a global scale.

Europe – Liza Aizupiete, Managing Director of Fintelum

Offering a suite of services built around digital securities, Fintelum is an Estonian based company, which launched in 2018.  The company looks to make full use of licensure, obtained through the Estonian Financial Intelligence Unit (FIU), in order to bring clients a comprehensive platform.

Fintelum #TokeniseYourAssets Explainer

  1.   In your opinion, what represents the largest industry achievement/hurdle cleared, to date?

LA: Looking at the digital securities space in Europe, I would say, the biggest achievement has been raising awareness about the industry in general. I took part in the EU Commission’s High-Level Roundtable on Cryptocurrencies and ICOs back in Feb 2018. That was one of the first attempts for the crypto industry participants and EU regulators to gather around a table and discuss how the industry should be overseen.

Cryptocurrencies is one thing. It’s to do with the monetary theory and personal liberty expressions. But when you enter the realm of securities, which historically for the purposes of investor protection are a heavily regulated area, you are facing existing securities laws that need to be reckoned with.

ICOs came about as a wholly new asset class. It stands apart in the digital assets space. STOs, however, are nothing less than digital representations of presently in-force forms of legal agreements.

Therefore, for industry players it was first to understand for themselves, what digital securities are, then educate and raise awareness to others and especially the regulators. Indeed, it’s encouraging to witness that Blockchain as a technology and fintech industry development at large are being placed as one of the main objectives of the political guidelines, put forward by the EU Commission’s president Ursula von der Leyen, in December 2019 inauguration speech.

  1.   With the aforementioned achievements laying a foundation for the industry, what remains as the biggest obstacle moving forward?

LA: There are few obstacles for securities to exist in a digital format. Especially, if we want to represent them as cryptographic programmable tokens, publicly visible to everyone, and yet obfuscated as to the exact ownership. Furthermore, we are obliged to follow the existing local securities laws, which uniformly mandate investor protection. From there it follows that decentralisation is not strictly possible, and centralised governance and exogenous controls are required to ensure strict compliance with the securities laws.

However, it would be an understatement to say that these very laws are relevant today. Indeed, the whole industry lacks innovation precisely because these laws were written for the day and age, when internet was not a thing, let alone a smartphone or cryptocurrency.

Both primary issuance and secondary market operations are laden with practical obstacles. In most European jurisdictions one cannot purchase securities with cryptocurrencies.

Another obstacle concerns localisation, when a project solicits cross boarder investors. Most crowdfunding platforms limit their scope to local investor sources, whereas cryptocurrencies would allow for border-less investment flow. This may especially be attractive to nations with less economic and political freedoms to invest in a country with clear rule of law, such as the European member states.

The same goes to operating a secondary market for digital securities. In Europe one would run into obligation to get local authorisation (bank, broker or MTF license). Secondary market is clearly over-regulated, and unduly so, when it comes to small capitalisation securities.

One positive development, however, is visible in the EU crowdfunding regulation initiative. There the proposal is to lessen the regulatory burden on the secondary market operations allowing bulletin board type of matching for small capitalisation securities.

Overall, security tokenisation is foremost a legal hurdle, if one is to do it right. And by right, I mean allow for investment and exchange in cryptocurrencies on a global scale and at the same time operate according to the local securities laws.

There are a number of obstacles, some of which we at Fintelum are trying to overcome by lobbying changes to the local securities law. It is our aim to allow for security tokens to act as transferable securities instruments in a given jurisdiction. And thus alleviate issuance and subsequent shareholder register maintenance in a less costly and more technically effective way.

  1.   With regards to friendlyregulation and government acceptance, have you noticed any countries leaving the rest behind?

LA: There are countries in Europe that have tried to embrace crypto and blockchain innovation. And those which have rushed to regulate it, albeit with the best intentions.

Take Malta as an example. Last year I had the opportunity to sit on a Token Modelling panel at the first Malta Blockchain Summit, which was attended by over 8,500 people. This event coincided with the new law on crypto and blockchain coming in to force on 1 November 2018. Although the aim was to make Malta the centre of blockchain business and innovation, the result is quite the opposite. Largely due to overbearing and restrictive set of rules, there are not that many businesses setting up in Malta as a consequence, a year later.

On another spin, Germany, for example, up until recently did not have any crypto specific regulation. But it has been legal to use cryptocurrencies for purchasing and exchanging debt instruments.

Another progressive development came through from Luxembourg and France last year. Broadly, both countries enacted their regulatory approval for securities to have blockchain based representation as valid, acceptable and wholly legal.

  1.   Much has been made about the transformative capabilities of digital securities. With the potential to affect change in many industries, which do you feel stands to benefit the most from the digital securities sector?

LA: With the advent of cryptographic, programmable blockchain money, we are already seeing advancement in global financial inclusion. Just by pure existence, cryptocurrencies such as bitcoin and ether offer alternative monetary systems to those who disagree with their fiat counterparts around the world nation-states.

If the first use case was money, then the second most important use case is investment. Digital securities, such that we have envisaged at Fintelum, are digital representations of presently in-force forms of legal agreements. Undoubtedly, the law is overly restrictive and even irrelevant today. And, it is bound to change, adapt and improve, eventually.

Meanwhile, if blockchain based transferable securities instruments start populating public peer-to-peer blockchains soon, we should see a much more increased data transparency, inclusiveness and true globalisation.

 If data is more accessible, it also means that the levels of education and general understanding amongst retail investors will inevitably increase.

Any industry whre one needs a trustless and permanent trace of some event, or where one requires an immutable digital public record will benefit. Because the technology has indeed arrived.

  1.   Looking forward, where along the growth trajectory do you see digital securities in the next two, and five years?

LA: Despite the technology advancement, we the people still need to catch up on all that is now possible. In two years time, we might have many proven business cases. But at the same time, we will certainly still be acquiring knowledge and improving adoption. The learning curve will eventually steepen, especially in more advanced economies. The least advanced economies may even be at the frontlines of adoption due the political circumstances.

In five years time, everything can change. Perhaps by then we will have new technologies that we will need to adapt to. Take quantum capabilities, for instance, or artificial intelligence applications.

Today, it is our intention, however, to pair programmable securities against programmable money. In other words, issue and pair securities against cryptocurrencies and thus advance adoption and use cases.


Well there you have it!  As 2019 is about to wrap up, there is a clear trend evident within the sector – a positive one.  While many hurdles have been met and cleared, there remain many more on the horizon.  Despite this, the potential that digital securities holds to reshape FinTech remains as tantalizing as ever.

We will touch base in a few months, to re-gauge industry sentiment with a new set of influencers from around the world.  Until then, stay informed by frequenting!