On March 17, the new Law 6/2023 on Securities Markets and Investment Services (“LMV”) was approved. This law replaces Royal Legislative Decree 4/2015 of October 23, which established the consolidated text of the Securities Market Law (“TRLMV”), and becomes the new overarching framework for securities markets regulation. The law was published the following day, March 18, in the Spanish Official State Gazette (BOE), and will therefore enter into force 20 days after that publication date.
Among other aspects, this new law regulates the tokenization of transferable securities, aligning it with the European pilot regime so that securities issued in primary markets can have access to a secondary market that provides liquidity.
In other words, investors will be able to buy and sell tokens.
Let’s start with the basics… What does “tokenize” mean? To tokenize is to digitally represent an asset. Under this new law, it will now be possible to tokenize shares, bonds, debt instruments, investment funds, and more.
An entrepreneur will have access to a secondary market to seek and offer liquidity for their transferable securities, thereby enabling them to implement their growth plans through these markets using blockchain technology.
This access is immediate and direct, without relying on traditional financial intermediaries. A retail investor — using only their mobile phone — could invest by simply saying: “Hey Siri, buy me shares of a friend who has just launched a startup and needs financing.”
What must an SME consider for a security to be tradable and tokenizable on this secondary market?
For the first time, the law recognizes the digital representation of a transferable security. To qualify as a transferable security, it must (i) embody an economic right and (ii) be capable of widespread and impersonal legal circulation. If these conditions are met, a share can be tokenized, and its digital representation is legally recognized under the new law.
This regulation was urgently needed to provide the legal certainty required for these types of operations and to establish a regulated national framework aligned with European regulations such as the MiCA Regulation, among others that are soon to be approved. MiCA aims to provide comprehensive regulation regarding crypto-asset issuers, exchange platforms, and cryptocurrencies, with the goal of harmonizing legislation across all EU Member States.
At ARMANEXT, we welcome the diversification of funding options in financial markets and the fact that these markets continue to adapt and innovate through technology, to the benefit of both issuers and investors.