“Uncertain regulatory is the biggest challenge,” says Gordon Einstein, Blockchain Legal Expert.

Gordon Einstein, Founding Partner of CryptoLaw Partners, says Security Token Offering (STO), this year’s wildly popular subject after the 2018’s collapsed wave of Initial Coin Offering (ICO), is moving at a fast speed, but also facing big challenges in the regulatory universe.  

In an interview with Asia Blockchain Review, Einstein, who also serves as Chief Legal Officer of Distributed Lab, says that while regulations for non-token securities are very clear and consistent, when you try to apply them to token offerings, the picture gets murky. This is because the existing rules and regulations were written for non-token securities. There are loopholes. According to Einstein, “this is the big elephant in the room.”  

Those who want to play in this new space are still searching for a clear regulatory framework to invest and conduct business. “Uncertainty in the regulatory sphere is the biggest challenge STOs are facing right now. Things are in flux, what’s legal in one jurisdiction may not be legal in another,” says Einstein.   

Even so, Einstein remains relatively optimistic. “I believe Bitcoin has a great future,” he says. But he cautions that companies will need to deal with plenty of issues, including Know Your Customers (KYC), Anti-money Laundering (AML), and more. The potential of abusing cryptocurrency, including money laundering and tax evasion are issues that the industry must come to grips with. Einstein reminds the market is still in its nascency but regulations can’t keep pace with blockchain innovation and development. “Establishing a strong foundation is critical to any business, but especially in blockchain. The critical questions are, which entities are you forming, and where are you forming them,” says Einstein.

A number of Asian countries are competing for strong positions in the STO regulatory space. Einstein cites Japan, Thailand, and Singapore, among others, but each for different reasons that allow them to sometimes be ahead or lag behind the market. “Sitting still and waiting”, is not an option,  but there’s danger if going too fast, Einstein reminds.

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