Complete EU Legal Guide: ART Tokens vs. Security Tokens

Comparative Analysis: ART Tokens under and over €5 Million, and Security Tokens - Definitions, EU Regulation, and Legal Requirements

Today we will look at comparison of ART tokens (under and over €5 million) and security tokens in the context of real estate. We will explain definitions, legal requirements, regulatory differences, and what steps are needed to launch each token type under EU law (MiCA and securities regulation).

This analysis provides a clear and practical comparison between: 

1. Asset-Referenced Tokens (ARTs) under €5 million,
2. Asset-Referenced Tokens over €5 million, and
3. Security Tokens.

It explains what each type is, how they are regulated, and details what is legally required for each structure, using concrete examples relevant to real estate.

Part 1: Definitions and Key Differences

Key Point: 

• ART token: Stable value, based on the value/yield of an asset, but does NOT give governance/voting rights. It is possible to deliver the “dividend” like rent etc. and is still ART token.
• Security token: Represents a direct stake in a company, with rights similar to shareholders, such as voting and dividends. It is typical that investment instruments are represented as Security tokens.

Part 2: Legal and Regulatory Requirements Comparison

1. ART Tokens under €5 Million

Regulation

The regulation is covered by MiCA (Markets in Crypto-Assets Regulation) with a light regime (“exempt small offer”).

Legal Requirements

• Whitepaper: Must be drafted and notified (sent) to the financial regulator (e.g. Czech National Bank), minimum 20 working days before offering the token to investors.
• No license or authorization required, just registration.
• No heavy capital/compliance requirements (unlike higher value tokens).
• Custody: Must ensure assets referenced by the token are held safely and are separated from the issuer’s own assets.
• KYC/AML: Know Your Customer and Anti-Money Laundering procedures apply for investor onboarding.
• Reporting: Transparency on underlying asset and value.
• Distribution: Allowed to the public if following notification procedure.

Use Case Example

A real estate project issues ART tokens referencing a specific property, where total issuance does not exceed €5 million in a 12-month period, and distributes income from property rental. No active shareholder rights or voting.

2. ART Tokens over €5 Million

Regulation

These ART Tokens are subject to MiCA full regime - this means authorization and regulatory supervision.

Legal Requirements

• Authorization: Issuer must apply for and obtain a license from the national financial regulator (e.g. Czech National Bank) before offering tokens.
• Whitepaper: Must be drafted and approved by the regulator.
• Governance: Issuer must have robust governance structures, internal controls, and clear separation of referenced asset(s).
• Audit & Reporting: Mandatory regular audits (typically every 6 months) of underlying assets, monthly reporting of tokens in circulation.
• Custody: Asset reserves must be held with an approved, regulated custodian, not directly by the issuer.
• Investor Protection: Strict rules on transparency, risk disclosure, and procedures for handling complaints.
• Capital Requirements: Potentially higher minimum equity/capital for issuer.
• Distribution: Only possible after license approval. Strong restrictions on misleading marketing and international distribution.

Use Case Example

A large-scale real estate platform wants to issue ART tokens for €20 million, referencing a portfolio of commercial properties. The issuer must prepare a whitepaper, apply for a license, organize asset custody and audits, and comply with detailed governance procedures.

3. Security Tokens - understood as derivates of existing investment instruments

Regulation

They are not regulated by MiCA. Instead, they are covered by traditional securities law (e.g. MiFID II, Prospectus Regulation).

Legal Requirements

• Prospectus: Issuer must prepare a prospectus and submit for approval to the regulator (Czech National Bank or other) before public offering.
• Issuance Registration: Security tokens must comply with national securities registration and listing requirements (often in a securities register or with a regulated exchange).
• Governance Rights: Security tokens generally provide shareholder/voting rights, rights to dividends or profit.
• Mandatory Investor Protection: Very strong rules on risk disclosures, suitability, complaint procedures.
• Compliance: Extensive AML/KYC, robust internal controls, ongoing reporting.
• Capital/Financial Requirements: May include high regulatory capital, regular audits.
• Custody: Use of regulated custodians.
• Marketing Restrictions: Only qualified investors for some types, strict transparency.
• Distribution: Secondary trading only on regulated exchanges/platforms.

Use Case Example

A company issues digital tokens equivalent to shares in the company, providing voting rights and dividends. All holders can vote on major decisions; trades happen via regulated exchanges. Full securities prospectus, registration, and compliance are required.

Part 3: Practical Comparison Table

Key Takeaways - For Non-Crypto Experts

ART tokens are digital assets whose value tracks an underlying asset (e.g. real estate, basket of currencies). They are not digital shares.

Small ART token projects (<€5 million): Lighter rules - need to prepare a whitepaper and inform the regulator, but no full license.

Large ART token projects (>€5 million): Heavy rules - need authorization from regulator, audits, strict custody, and investor protection.

Security tokens: Are digital representations of shares, bonds, or other securities. Full “stock market” rules apply, including voting rights and dividends.

The main difference is whether your token gives ownership and decision rights (security token) or simply represents a digital claim on the value/yield of an underlying asset (ART token).

If your token provides ownership, company governance, or dividends not linked directly to an underlying asset’s yield, securities law applies, and the regulatory burden is much higher.

Always consult a legal expert in financial regulation before launching any tokenized project. Incorrect classification can lead to severe fines or project shutdown by regulators.

Author: Mgr. Petr Uklein

Searching for tokenization experts? You are on the right place, contact us.

Napište našim odborníkům, pomůžeme vám!

Neváhejte se s námi podělit o svou situaci a stručně popsat, s čím vám můžeme pomoci. Sdělte nám, jak vás můžeme nejlépe kontaktovat, a náš tým se vám obratem ozve s návrhem řešení. Pro vaši lepší orientaci doporučujeme se předem seznámit s naším ceníkem služeb.

Po-Pá: 9:00 -18:00

info@modernipravnik.cz

📞 (+420) 732 394 849

Souhlasím se zpracováním osobních údajů za účelem vyřízení mé poptávky.

Odeslat