--- title: "What Is an STO? Security Token Offerings vs ICO and IPO" url: "https://hokenfi.com/en/what-is-an-sto/" site: HokenFi published: "2026-08-14T14:34:25+00:00" modified: "2026-08-14T14:34:47+00:00" language: en-US author: "Jesús Sánchez Fernández" description: "STO means security token offering: a regulated securities issuance on a distributed ledger. How it differs from an ICO and an IPO, and the EU route." section: "Home > Uncategorized > What Is an STO? Security Token Offerings vs ICO and IPO" --- # What Is an STO? Security Token Offerings vs ICO and IPO STO means security token offering: a capital raise in which the securities, whether shares, bonds or fund units, are issued as tokens on a distributed ledger. Legally it is a securities offering, not a crypto sale. The instrument keeps the full regulation of its paper equivalent. What changes is the register. ## STO meaning, word by word Each word in the acronym carries legal weight. Security: the token is a financial instrument, with the rights and the rulebook of one. Token: the instrument is represented on a distributed ledger instead of on paper or in a central depository. Offering: it is distributed to investors under the disclosure rules that govern any securities offer, public or private. Nothing in the acronym promises a market, a listing or a return. It names a legal form of issuance, and everything else remains deal-specific. The label settles which law applies. The EU regulation on crypto-asset markets excludes financial instruments from its scope, so an STO is governed by securities law and supervised by securities authorities, not by the MiCA regime (Regulation (EU) 2023/1114, art. 2.4; [EUR-Lex](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114)). Whether a given token qualifies is a substance test, explained in our guide to [what a security token is](https://hokenfi.com/en/what-is-a-security-token/). ## STO vs ICO vs IPO | | STO | ICO | IPO | | --- | --- | --- | --- | | What is sold | A financial instrument in token form | A utility or payment token | Shares admitted to a regulated market | | Legal framework | Securities law: Prospectus Regulation, MiFID II | MiCA, for crypto-assets that are not financial instruments | Securities law plus listing rules | | Disclosure document | Prospectus, or exempt-offer documentation | Crypto-asset white paper | Full prospectus | | Investor rights | The rights of the instrument: dividends, coupons, repayment | Whatever the token terms grant, often access rights only | Shareholder rights | | Supervision | National securities supervisor (in Spain, the CNMV) | Authority designated under MiCA | Securities supervisor and market operator | Read the table by rows, not by labels. An STO borrows its instrument from the IPO world and its rails from the crypto world, and the regulation follows the instrument, never the rails. The middle column explains most of the confusion around the acronym. The ICO wave sold tokens that granted no instrument rights, and some of them behaved economically like securities anyway. Supervisors responded by looking through labels, and that response is now written into the framework: the qualification test runs on the rights granted, not on the branding. ## The EU route: prospectus or exemption Public offers of securities in the EU sit under the Prospectus Regulation. A prospectus approved by one national authority can be passported across every member state, which turns one approval into an EU-wide offering permit (Regulation (EU) 2017/1129, arts. 24-25; [EUR-Lex](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32017R1129)). How that works for token issuances is covered in our guide to [the EU prospectus passport for security tokens](https://hokenfi.com/en/eu-prospectus-passport-security-tokens/). Below certain sizes no prospectus is required. Since 5 June 2026, offers below 12 million euros over 12 months are exempt at EU level, with a member-state option to lower that ceiling to 5 million (Regulation (EU) 2024/2809; [EUR-Lex](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32024R2809)). Exempt does not mean unregulated: national disclosure and marketing rules still apply below the threshold. The choice is strategic rather than cosmetic: a passported prospectus opens every EU market at once, while an exempt offer trades reach for speed and cost. Before sizing the raise, check which ceiling applies in each country you plan to sell into. ## The Spanish layer: registration with an ERIR Spain adds a register requirement specific to tokenized securities. The instrument must be recorded by an ERIR, the entity responsible for recording and registering it. Think of the ERIR as the digital notary of the register (Ley 6/2023, art. 8; [BOE](https://www.boe.es/eli/es/l/2023/03/17/6/con)). Royal Decree 814/2023 develops the regime and the entity’s obligations ([BOE](https://www.boe.es/buscar/act.php?id=BOE-A-2023-22764)). The first ERIR, URSUS-3 Capital, A.V., was authorised in November 2024, which makes Spain a jurisdiction where this route has been exercised, not merely legislated. The register requirement is not a second approval of the offer: the ERIR keeps the record of the instrument and its holders, while the disclosure rules above decide how the offer may be marketed. For planning purposes, appointing the ERIR belongs on the issuance calendar as early as the legal drafting does. ## What an STO does not change Distribution still runs through the rules for financial instruments: who may market the offer, to which investor categories, with which warnings (Directive 2014/65/EU; [EUR-Lex](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0065)). And liquidity is not automatic. Issuing on a ledger makes the instrument transferable, but a market still has to exist for it. The EU DLT Pilot Regime allows trading venues for tokenized instruments, and they are appearing gradually rather than everywhere at once (Regulation (EU) 2022/858; [EUR-Lex](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32022R0858)). The prudent planning assumption: investors hold to maturity, and any secondary market is upside. ## Decision criteria for an issuer 1. Classify the token. If it grants instrument rights, it is an STO, and securities law is your framework from day one. 2. Size the raise against the prospectus exemption thresholds of each target country, and let that decide your disclosure document. 3. If issuing in Spain, put ERIR selection on the critical path, alongside the legal drafting rather than after it. 4. Write the investor communication assuming no secondary market. If one develops, it improves the case instead of rescuing it. **An STO is a securities offering with a better register, and it is planned like one.** Run the [2-minute issuance assessment](https://hokenfi.com/diagnostico-de-emision/) or [request a proposal](https://hokenfi.com/solicita-propuesta/). *This content is educational. It is not legal, tax or investment advice. Always check the current version of each rule on BOE and EUR-Lex.*