Romania: The new capital markets
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Romania: The new capital markets

It was January 3rd,2009 when the bitcoin network was created and Satoshi Nakamoto mined the first block of the chain, the genesis block. It was the birth of a technology that will grow to be embedded in almost every aspect of our life.

After the bitcoin rally, the financial world took notice and started getting involved in the field. It was only a matter of time before the first financial products started to take shape, first with the ICOs (initial coin offerings) and then with the securities token offerings (STOs) or equity token offerings (ETOs).

Valentin Gheorghiu Bârgău, Partner, Expert in Capital Markets & Blockchain, ECOVIS CIURTIN & Associates Advisory, Bucharest, Romania

Ever more countries are incorporating DLT into their financial markets. The relevant national legislations need to be brought up to speed and establish clear regulations for the digital financial world.

The 1.8 billion STO market started to pick up pace last year and in 2019 we will see an acceleration of this trend. The STO is so attractive because for the first time we can bridge the distributed ledger technology (DLT) space with the financial one under a regulated environment. This evolution will allow small and medium companies that until now could not afford it to go public and raise money to do so at a reasonable cost and in a reasonable time frame.

STO/ETO vs IPO

The main problem with the ICOs was that they were unregulated, and this created a major weakness that prevented this method of raising capital to go mainstream.

The natural consequence was therefore to create tokenized securities. They have the same advantages as ICOs but with the security of IPOs. Of course, this created challenges and opportunities alike. The main opportunity has to do with access and the main challenge is the regulatory environment and liquidity.

Through our advisory division, Ecovis Ciurtin & Associates is currently advising a Romanian energy supplier on executing an STO of 200m EUR. In this role we are dealing with every aspect of this process.

Advantages for companies:

  • much lower costs than IPOs
  • automated KYC and AML procedures (including accredited investors checks)
  • lower entry barrier
  • access to a bigger pool of investors

Advantages for investors:

  • regulatory protection
  • greater transparency
  • real time settlements
  • real time access to a company’s financial information

In this process we identified two aspects that need to be addressed in order to streamline the wider adoption of DLT technology, legislation and human resources. The most critical aspect is the regulatory framework, not only for the lack of new legislation but also for the lack of convergence with the old one. The other problem is the lack of human resources available with relevant expertise.

We have seen some progress in these two areas in some countries across the world like Malta, Gibraltar, Switzerland and Singapore but the jurisdictions where the large financial centers are situated are moving at a much slower pace.

However, the tide is changing, and more countries are becoming crypto friendly, integrating this new technology into their financial markets. As a result, we expect in the following years both the regulatory framework and convergence within the legislative process to accelerate, firmly establishing DLT technology as one of the bedrocks of our financial digital world and beyond.

Author
Valentin Gheorghiu Bârgău,
Partner, Expert in Capital Markets & Blockchain,
ECOVIS CIURTIN & Associates Advisory, Bucharest, Romania
Email: v.bargau@ciurtin.ro

Contact us:

ECOVIS CIURTIN & Associates
Nicolae Caramfil Ave. 61C
014141 Bucharest
Phone: +40 315 400 100
www.ecovis.com/bucharest-law