Japan Joins Asian Security Token Market Through iSTOX

Japan Joins Asian Security Token Market Through iSTOX

On November 14th 2019, Japan-based firm Tokai Tokyo Financial Holdings announced an investment in developing security token platform iSTOX. The investment is anticipated to result in a higher rate of security token adoption in Japan and could even lead to Japan’s own security token exchange in the future.

Details Concerning Tokai Tokyo’s Investment in iSTOX

Tokai Tokyo Financial Holdings is a financial services group based in Tokyo. The firm has now entered the security token industry through an exchange in Singapore, but has potential plans to bring securities tokenization capabilities to Japan.

Tokai Tokyo is set to invest about 500 million yen — which equates to $4.58 million — for a 4.8% stake in the company behind iSTOX. As a complete end-to-end security token platform, iSTOX plans to offer not just initial issuance and tokenization services but secondary market trading as well.

Based in Singapore, iSTOX is a product of Heliconia Capital Management and Singapore Exchange (SGX). Singapore Exchange will soon launch a company to operate iSTOX. The investment will make Tokai Tokyo the sole Japanese investor in the company. Other notable investors include Temasek Holdings, a state fund from Singapore, who has a nearly 11% stake.

iSTOX expects to see regulatory approval from the Monetary Authority of Singapore (MAS) — the country’s central bank and financial regulating authority — in February of 2020. If it does, iSTOX will constitute the first platform of its kind as a regulated security token exchange in Singapore.

Security tokens take traditional financial securities including assets such as equity, real estate, investment funds, and even fine art, and incorporate the benefits of blockchain technology. The benefits include added liquidity, democratized financial access, fractional ownership, and the removal of unnecessary — and often costly — middlemen. The result is a much more efficient, robust, and less financially burdensome financial realm.

Japan is expected to approve the use of security tokens in April 2020. Some believe Tokai Tokyo’s investment in iSTOX will set the firm up to build a bridge for tokenized securities in Japan.

The firm already plans to broker security tokens listed on iSTOX to investors based in Japan, and wants to assist Japan-based companies in raising capital through Security Token Offerings (STOs) via iSTOX. The firm is reportedly considering establishing a security token exchange of its own, in Japan, which will be associated to iSTOX. If this were the case, iSTOX could certainly find itself as a leader in security token innovation throughout the Asian securities market.

Security Tokens in Japan Explained

Japan has witnessed an increasing interest in security tokens throughout the past year. Securitize, a San Francisco-based tokenization technology provider, has put notable effort in breaking into the Asian securities market.

They’ve partnered with the Japan Security Token Association (JSTA), an organization which aims to educate and advocate for security tokens. Through the partnership, Securitize says it will work with local and international business regulators to bring security token adoption to the region.

Financial regulators tend to be hesitant when it comes to the incorporation of blockchain technology and fundraising. Much of this stems from the industry’s recent Initial Coin Offering (ICO) surge, when billions of dollars where raised to fund projects while curtailing virtually all of the associated laws and regulations — which claim to target investor protection.

Yet this is where the ICO and STO differ. Since the STO explicitly acknowledges that it is indeed a securities offering, it must feature compliance with its jurisdiction appropriate securities laws. In this sense, security tokens are very similar to traditional regulated securities, such as the classic ‘paper stocks’. Yet they are powered by blockchain technology, which results in significant cost-saving benefits and drastically easier management when compared to much of the world’s legacy securities systems.

What do you think about Tokai Tokyo’s investment involving iSTOX? What will the security token industry look like in Japan one year from now? We want to know what you think in the comments section below.

Image courtesy of GaijinPot Blog.

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