Security token offerings (STOs) are almost all anybody can talk about these days. Of course, STOs have some clear benefits. First, unlike in initial coin offerings (ICO), all utility tokens have some kind of tangible backing in the form of something like a company’s ownership (equity), profits (dividends), or even in physical assets. Second, STOs’ technical features provide things like automation and even transparency that cannot be fully integrated into security issuance. Finally, STOs are flexible and give many contemporary options to businesses that might have particular community building or financial needs.
Right now there are already many large institutions and innovative individuals that are extremely interested in the benefits that STOs could bring to Asia. The Singapore Stock Exchange, for one, have shown keen interest and have made investments in the security token sector. In terms of national governments, Thailand and Hong Kong look to be leading the pack.
In March this year, Thailand’s Securities and Exchange Commission (SEC) approved the country’s first ICO portal. This makes it easier for ICOs in Thailand to be screened, confirm smart contract code, and to fulfill KYC requirements in regard to investors. While this portal
currently only concerns utility token issuance, regulators have indicated that this is the first step towards the establishment of a full framework for security token finance in Thailand.
Legislation has already gone in that direction. On 8 February 20194, Thailand’s National Legislative Assembly voted to approve an amendment to the Securities and Exchange Act that effectively legalizes the issuance and trading of securities such as stocks and bonds using blockchain technology. This first step certainly sets the tone for STOs in Thailand.
In early November, Hong Kong’s Securities and Futures Commission (SFC) announced that they would be taking a new approach to the regulation of virtual asset portfolio managers and funds. Now, all portfolio managers and other service providers that intend to invest at least 10% of assets in tokens and cryptocurrencies will be monitored by the SFC and obtain relevant licenses.
Similar obligations have been applied to virtual asset trading platforms, such as token exchanges. While these new rules are not specific to security offerings, they certainly indicate the positive attitude that this jurisdiction is taking regarding the STO concept.
A topic of constant debate in the blockchain community is whether 2019 will be the year of the STO6. However, today, almost halfway through the year, things still look to be undeveloped in terms of regulation. While positive developments are being made everywhere, including in Asia, it looks like some things still need to be figured out. If one thing is for sure, though, it’s that STOs are coming. It’s just a question of when, how, and where that will happen.
The Asian STO is on the way, and Thailand and Hong Kong are almost certainly ahead of the pack.
For more insights into the future of STOs in Thailand and Hong Kong, catch the full article in the second issue of UM RegTech’s VisioBloc report: The Crypto-Fundraising Landscape.
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