Regulations and compliance STO-based crowdfunding platforms

Abstract

This thesis investigates the design and regulatory landscape of Security Token Offerings (STOs) as a compliant blockchain-based alternative to traditional equity crowdfunding. While blockchain has shown potential to improve transparency, efficiency, and liquidity in fundraising, its integration into financial systems remains challenged by complex and evolving regulatory environments—particularly within the European Union. This research explores both the technical and legal dimensions of STOs by implementing a blockchain prototype based on Ethereum smart contracts and IPFS-based KYC/AML verification. The prototype supports equity token issuance, investor authentication, and compliant transaction processes, offering a practical model for startups seeking to issue digital securities.

The study further analyzes EU-level regulations such as MiFID II and the Prospectus Regulation, identifying critical compliance requirements and the limitations of existing frameworks when applied to decentralized technologies. A case study on the failure of Neufund illustrates how regulatory uncertainty can hinder the growth of STO platforms. The research contributes to academic discourse by proposing generalized design principles for STO-based equity crowdfunding and evaluating their feasibility through expert interviews and iterative testing. While the prototype demonstrates STOs' potential to democratize access to investment and improve the funding lifecycle, the findings emphasize the necessity for a technology-neutral and harmonized legal framework to support innovation without compromising investor protection. Recommendations include adopting hybrid regulatory models and establishing supranational supervisory authorities to facilitate secure and scalable implementation of STO-based crowdfunding across the EU.