Back in March 2019, Taiwan’s Financial Supervisory Commission (FSC) announced to put up certain regulations in place to provide a green flag to security token offerings (STOs), as a result boosting the country’s capital market.
The regulatory authority is taking a proactive approach to reap maximum benefits of the trending STOs. FSC has drafted a rough framework while analyzing standards of other countries. Below are few points covering what you can expect from upcoming regulations:
Key Proposals for Upcoming Regulations
However, optimistic the news is for security token industry, the country’s fintech community and FSC are not able to come on the same page as of now. The financial regulator has proposed setting the normal fundraising ceiling for an STO at about US$1 million (NT$30 million), which could prove to be insufficient for startups in majority cases. Taking the statements from fintech industry’s point of view, Legislator Hsu advocates raising the limit to US$ 4.5 million (NT$150 million). He says that startups at most times need to raise between US$3 million and US$5 million in their first round (Series A) of fundraising.
Meanwhile, FSC has proposed to permit companies to raise more than US$ 1 million with an STO if the firm do it through Taiwan’s fintech regulatory sandbox, where the commission can monitor risks. Sandbox investments will be limited to US$ 6.5 million (NT$200 million).
Who can Invest
Continuing the restrictive approach, the FSC’s plan would restrict non-accredited investors from participating in STOs, although critics add that such a provision would run counter to the spirit of STOs, and will not allow a wider range of people to participate in capital markets as hoped. If this happens the industry will limit itself to institutional heavyweights.
If Taiwan’s STO regulations are too restrictive, there is a risk that companies will choose to operate outside the regulations, which is feasible in the largely uncharted virtual currency space, says Ryan Terribilini, CEO of Formosa Financial, startup that manages digital assets.
Dedicated Trading Platform
For a good sign, FSC aims to set up a dedicated security token trading platform separate from the Taiwan Stock Exchange and the over-the-counter Taipei Exchange. Companies operating virtual currencies will need special licenses to accept orders, the FSC says.
Jason Hsu, one of Taiwan’s leading fintech advocates said “STOs could help young Taiwanese become more involved in Taiwan’s capital markets. In general, younger Taiwanese are not interested in the traditional stock market, with the introduction of STOs this could change and capital market can boom.”
Alex Liu, Co-founder | CEO of Maicoin, a Taiwan-based digital asset exchange platform states “The forthcoming STO regulations as a significant step in Taiwan’s gradual adoption of fintech and blockchain technology. However, he regards FSC as being more focused on protecting domestic investors than developing a thriving STO ecosystem.
At a Glance: Previously in April 2019, London Stock Exchange became the first to trade and issue blockchain based security tokens on its platform.