Setting Up an STO in Asia Could Get Easier

March 11, 2019

The Asian crypto market is among the world’s largest. Indeed, Japan and South Korea lead the industry, hosting the second and third biggest markets (after the United States) for digital assets. However, when it comes to the regulation of security tokens, Asia has lagged behind other parts of the world.

For instance, in Malta, virtual financial assets are recognized as mediums of exchange, units of account, and as stores of value. Switzerland, on the other hand, recognizes tokens as representations of the value of a property. Regulators in the United States (generally) approach digital assets as if they were securities.

Asian companies that wish to issue security tokens without leaving the continent have few options. Singapore has been the best hope so far, as tokenized securities are treated like conventional ones there. However, no token offering has yet to be approved by the Singaporean regulatory body, with one being barred as recently as January 24th.

Today, with a rising interest in security tokens globally, and with certain Asian regulators wanting to ‘keep up’ with countries like Malta, new laws in Thailand, the Philippines, and Malaysia may make an Asian STO possible.

Countries that are bringing STOs to Asia

Thailand: On February 8th, the national legislative assembly of Thailand endorsed an amendment to the Securities and Exchange Act that paves the way for a regulated security token market in the country. This change to the law will enable the issuance of tokens that would be regulated as are other stocks and bonds.

For potential issuers, Thailand shows a lot of promise. The Thai Securities and Exchange Commission already granted four cryptocurrency operator’s licenses in January and the country’s official stock exchange (the SET) has applied for a license to trade digital assets.

Malaysia: Less than a month earlier, on January 15th, Malaysian regulators announced that  they would class cryptocurrencies as securities, paving the road for security token offerings there. All good news comes with a downside, however. Unauthorized exchanges and ICOs could face stiff penalties, such as 10-year prison sentences and fines going up to $2.4 million.

Philippines: In early February, the Economic Zone Authority in Cagayan, an offshore special economic zone located in the Philippines, announced that it had created a set of rules that would govern cryptocurrencies within the sector. These Digital Asset and Token Offering (DATO) Regulations outline a framework for the classification, evaluation, and regulation of various types of crypto assets, including utility and security tokens.

The DATO framework divides STOs and ICOs into tiers based on the amount of funds that are sought. Companies in the lowest tier, intending to raise $5 million or less, are only required to comply with certain basic requirements. The higher tiers require a greater level of regulatory permission.

Will setting up an STO in Asia get easier?

It is still too early to make any strong conclusions regarding security token issuance in Asia. However, it is clear from the newly enacted policies in Thailand, Malaysia, and the Philippines that certain countries on our continent are open to taking a pragmatic approach to blockchain. We will just have to wait and see.

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