Fri, Apr 05, 2019 page12

• FSC cautious over securities token laws

  ‘STEP-BY-STEP’: Securities and Futures Bureau official Tsai Li-ling said that the commission initially would only permit firms to offer interest payments as bonds

  • By Kao Shih-ching / Staff reporter
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  The Financial Supervisory Commission (FSC) yesterday said it would take a cautious approach toward implementation of securities token offerings (STOs), as it plans to introduce new laws by June to address the growing popularity of virtual currencies.

  Interested parties might be allowed to raise up to NT$30 million (US$973,489) through STOs, but blockchain-based tokens would not be allowed as equities, the commission said.

  A securities token is a kind of virtual currency. Unlike bitcoin, which has no central issuer and can only be released through a process called “mining,” securities tokens are launched by companies aiming to raise funds.

  “The securities tokens are issued in foreign countries as digital assets based on blockchain technology,” Securities and Futures Bureau Deputy Director-General Tsai Li-ling (蔡麗玲) told the Taipei Times by telephone.

  “So far, holders of securities tokens enjoy certain ownership in the issuing companies and can receive dividends as if they are investing in stocks,” Tsai said.

  “They can also receive interest payments from the sale of securities tokens as with corporate bonds,” she said.

  As securities tokens possess securities-like attributes, their issuance would be subject to traditional securities regulations, she said.

  However, the commission initially would only permit securities tokens to offer interest payments as bonds and would require the issuers to clearly state how many they plan to distribute, Tsai said.

  The commission would prohibit companies from offering equities-like tokens, as such practice is more strictly regulated by the Company Act (公司法), she said.

  “The offering of equities-like tokens are possible, but we prefer a step-by-step approach to see how STOs do first,” Tsai said.

  The commission’s threshold of NT$30 million for fundraising followed discussions with several parties interested in STOs, Tsai said, adding that the amount should be enough for start-ups, or small or medium-sized enterprises.

  Unlike an initial public offering, STOs would be exempted from some administrative requirements and could proceed much faster, Tsai said.

  As for companies that intend to raise more than NT$30 million through an STO, they would have to run experiments in a regulatory sandbox so the commission could carefully monitor the risks, Tsai said, adding that sandbox investments would be limited to NT$200 million.

  “So far, more than one company has expressed interest in running a sandbox experiment to provide virtual-currency services, but not everyone plans to launch an STO, a new investment tool that began to emerge in the second half of last year,” Department of Planning Director-General Lin Chih-chi (林志吉) said.

  Maicoin (現代財富科技), a local platform for virtual currencies, has expressed an interest in an STO, Lin said.

  The commission would counsel the firm before accepting its formal application, he said.

  The commission would establish an independent platform for the trade of security tokens that is different from the Taiwan Stock Exchange or the Taipei Exchange, it said.

  The commission said that plans to issue special licenses to companies operating virtual currencies, which would require special software to accept sell and buy orders.

  However, the commission still has many issues to resolve, such as whether tokens should be standardized, or if tokens should be secured by collateral.

  “We have outlined our strategy, but there is more to be discussed,” Tsai said, adding that the commission has invited private-sector parties to a forum next week to discuss the proposed regulations in detail.
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