At the beginning of 2020, Taiwan’s FSC – Financial Supervisory Commission – proposed a new legal framework for Security Token Offerings (STO). At first glance, deregulating STOs if they’re equivalent of up to NT$30 million may have seemed like a positive step. Unfortunately, this exemption was framed within a tight set of restrictions, making Taiwanese STOs largely inaccessible to anyone who is not a professional Taiwanese investor.
Taiwan’s New Security Token Legislation Explained
Although Taiwan’s legal status on the global stage is precarious due to its unresolved relationship with China, it continues to enjoy the status of an economic powerhouse, ranking as the 22nd richest country in the world, with the 7th largest economy in Asia.
In addition to its formidable purchasing power parity (PPP), Taiwan is also under the unofficial protectorate of the United States. Considering these factors, the potential for political instability remains relatively low for international investors in Taiwan, including cryptocurrency investors. Therefore, the recent legislative reframing of Security Token Offerings (STOs) is applicable to investors across the globe.
How Are Security Tokens Treated in Taiwan?
- Outside of the NT$30 million exemption for STOs, investors must be professional individuals and cannot exceed NT$300,000 for each STO project.
- The NT$30 million exemption only applies to STOs conducted on the same trading platform, and funds must be denominated only in New Taiwan Dollars (NT$).
- All companies dealing with security tokens must apply for a securities dealer license. However, if a company deals only with security tokens, the minimum invested capital must be $100 million USD, with a NT$10 million operating margin.
- When it comes to trading, the combined volume of a single security token traded on the same business day cannot pass 50% of the outstanding security token volume.
- Taipei Exchange fee accounts for 0.002925% of a security token’s monthly closing price.
- Companies must implement price stabilization mechanisms.
- STO issuers must have a contractual relationship with the Taiwan Depository and Clearing Corporation in order to relay daily STO trading information.
Negative Reaction to Taiwan’s STO Legislation
FinTech entrepreneurs and academics involved in the emerging STO market are noting their displeasure at the new legislative framework. In particular, they are dissatisfied with the imposed limit of NT$30 million for declaration exemption. The second limit, NT$300,000 for individual professionals, excludes the STO market from ordinary citizens.
When it comes to the exclusion of foreign investors, the language is not specific but infers previous legislation that prohibits investors who are foreign nationals and overseas Chinese. Another exclusion is the insistence on NTD denomination as the STO’s funding source. This adds another major obstacle for foreign investors.
Lastly, the limitation to a single trading platform, for cumulative NT$30 million exemption to take place, drastically reduces the incentive for market participation, both for trading platforms and STO issuers. Not to mention the limit on volume for each STO. Overall, this is not the direction many investors were hoping for.
Have Taiwanese legislators dashed your hopes for STO adoption in the Asian market? We want to know what you think in the comments section below.