Taiwan’s Position on STO Regulations

Asia Blockchain Review

September 18, 2019

Taiwan's Position on STO Regulations

Since the launch of Bitcoin, the Taiwan government has been facing a dilemma of whether to regulate or liberalize digital currencies. Regulation could reduce financial crime and protect financial institutions. While liberalization would nurture a domestic financial technology sector. 

At present, it seems the country’s government and ruling party are bending towards liberalization, which could make it easier to trade cryptocurrencies. 

Taiwan’s Cryptocurrency Industry 

Numerous reports over the last few months prove that the country is willing to welcome digital currencies with open arms. One key event that could determine this case was when Wellington Koo, Chairman of the Financial Supervisory Commission (FSC), told the parliament that opportunities brought about by crypto and blockchain should be embraced. 

Jason Hsu, a Congressman, echoed this statement by saying that the country should explore the potential of digital currencies and blockchain technology. 

He also discouraged moves to clamp down on cryptocurrencies. According to Hsu,

Just because South Korea and China are banning, doesn’t mean that Taiwan should follow-suit, since there is a huge opportunity for growth in the future. We should emulate Japan, where they treat digital currencies as a highly regulated, highly monitored industry like securities.

This move to regulate the crypto industry comes after a sham crypto investment scheme that stole $51 million from more than 1,000 investors in the country took place. This pushed the government to establish tighter regulations on the industry, as government officials discouraged the outright banning of the industry. 

Overall, the country is crypto-friendly and also leading the effort in groundbreaking blockchain startups. Additionally, leaders such as Hsu have taken active steps to transform the country into a “Blockchain Island.” 

The leader is working with local blockchain startups to develop a digital identity solution called Taiwan Global ID, which will enable citizens to acquire their visas on the blockchain. 

Additionally, the Taiwanese government considers cryptocurrencies as commercial merchandise, and thus allowed the launch of Initial Coin Offerings. 

Taiwan’s STO Regulations 

Although STO regulation is a risky business, Taiwan is determined to become a leader in the still-growing industry by adopting STO regulations. 

According to Koo, the STO regulation framework is the first of its kind, since other countries use existing securities laws. 

Earlier this year, the commission published a draft of its proposed laws, which included a fundraising limit for STOs of $1 million (NT 30 million), and a maximum per person investment of $3,000. 

Nonetheless, these laws were met with mixed reactions, since many considered the fundraising limit would only be enough for a seed round, and not even a series A. 

However, the approved framework maintained the limit but raised per person investment to $9,600. 

Nonetheless, Legislator Hsu argued that the limit should be upwards of $3 million to $5 million for the first round (Series A). 

Greg Buxton, a corporate transactional lawyer with Taipei-based Winkler Partners, agrees with Hsu, stating that, “Such a low limit creates unnecessary barriers to capital flows from individual professional investors.”

The FSC stated that they would allow companies to raise the ceiling provided they agree to enter a ‘sandbox,’ which involves an extra layer of scrutiny from the Commission to monitor risks. 

This is the first step of testing to see what works best. At present, the country’s financial authorities see STOs as a new equity crowdfunding model. STOs are generally, less risky compared to ICOs, and this is one of the main reasons why the FSC is considering regulating the same. 

Conclusion 

The Taiwan government has an open mind regarding cryptocurrencies and blockchain, and developments in STO regulations is proof enough that the country is on a path of fully embracing the crypto industry. 


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