A blockchain-powered small business (SMB) lending FinTech in Germany is claiming to undertake the country’s first “regulated” Security Token Offering (STO), according to CoinDesk on Wednesday (May 29).
Bitbond is aiming to raise about $3.9 million from the STO, which the company said will be used to finance more loans for small businesses in the country. The firm announced its STO earlier this week, which will run until early July for investors anywhere except the U.S. and Canada.
“Small businesses are an incredibly important part of the economy, and hire the majority of all employed people worldwide,” said Bitbond Founder and CEO Radoslav Albrecht in a statement. “We see this STO as a way to help small businesses create more jobs and supercharge their own growth.”
The fundraising will sell Bitbond’s proprietary security token, BB1, which operates similar to a corporate bond, reports noted. The company plans to buy back the tokens after 10 years.
Since Germany’s financial regulator, BaFin, has approved of the company’s STO prospectus, Bitbond is claiming that the Security Token Offering is the nation’s first to be regulated. According to reports, the company has so far raised about $8.9 million in three separate venture capital rounds.
STOs are similar to Initial Coin Offerings (ICOs), though among their main differences is STOs’ position with regulators. In the U.S., the Securities and Exchange Commission (SEC) requires for STOs to be registered with regulators, and fall under Regulation A+ securities exemptions. Proponents have said they are less risky than ICOs for investors and companies, particularly in the wake of regulatory crackdowns on ICO fraud.
Earlier this year, Brazil investment bank BTG Pactual announced its own STO, an initiative that the bank said, “Allows us to be a pioneer in providing access to asset classes that have historically been difficult for global retail investors to access.”