Is STO legal in Taiwan, as the Tokyo Metropolitan Government in Japan supports digital securities issuances through subsidies?

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Is STO legal in Taiwan, as the Tokyo Metropolitan Government in Japan supports digital securities issuances through subsidies?

On May 31, the Tokyo Metropolitan Government in Japan announced that it will provide subsidies to companies issuing security token offerings (STOs) with the aim of promoting the widespread adoption of blockchain technology and providing diversified funding options for startups.

Tokyo Offers Up to 5 Million Yen in Subsidies for Single Company

According to the Japanese media coinpost, the Tokyo Metropolitan Government's Policy Planning Bureau has announced the launch of a support program for the issuance of "digital securities (security tokens)." The aim is to utilize the high liquidity and convenience of digital securities to increase the flow of funds between retail investors and startup companies, creating new economic activities.

Additionally, it is mentioned that a portion of the budget will be allocated to subsidize expenses incurred by Tokyo companies in issuing digital securities, including costs related to platform usage, consulting, and system development. The subsidy rate for general companies is 1/2, while for startups it is 2/3, with a maximum subsidy of 5 million yen per case (approximately 36,000 US dollars).

The application period is from now until February of the following year, but acceptance will stop once the budget limit is reached, and approval or rejection will be determined at review meetings held every one to two months.

Furthermore, the Japanese government had previously stated in the "Basic Policy on Economic and Fiscal Management and Reform for FY 2022" last year:

For more information on Japan's crypto development, please refer to this article.

What Are Security Tokens?

Security tokens are a way of issuing securities using blockchain technology. They convert traditional securities assets such as stocks, bonds, or real estate into digital tokens and are issued, traded, and settled using blockchain technology. They can be issued by entities such as companies or governments.

Regarding the distribution of security tokens, it is also known as Security Token Offering (STO). Since it is still regulated by securities and anti-money laundering laws, STO is more similar to an Initial Public Offering (IPO) rather than an Initial Coin Offering (ICO).

Advantages and Disadvantages of Security Tokens

The characteristics of security tokens are based on their construction on the blockchain. Their advantages include transparency in transactions, fast settlement, and 24/7 trading. However, they also face challenges such as inconsistent regulatory standards globally and high thresholds and technical risks.

Advantages

  • Transparency in transactions: The transparency of blockchain allows anyone to freely view or track the issuance and ownership of tokens and conduct audits at any time.
  • Fast settlement: The settlement of assets and rights has traditionally been a cumbersome and time-consuming process, often taking a long time for asset transfers. On the blockchain, this process is automatic and can be completed within minutes.
  • 24/7 trading: Blockchain enables automated trading markets, unaffected by the closing times of traditional financial institutions.

Disadvantages

  • Inconsistent regulations: Regulatory standards vary across different countries and regions. To operate globally, adjustments must be made to comply with local regulations.
  • High thresholds and technical risks: The blockchain field involves complex terminologies and unique market conditions, making it challenging for ordinary investors to fully understand. Additionally, due to the nature of blockchain programming, there is still a possibility of vulnerabilities being exploited.

Are Security Tokens Legal in Taiwan?

According to the Taipei Exchange data, Taiwan has regulations in place for the issuance of security tokens and can accept applications. However, there are many restrictions on issuers and trading platforms, and the operation is not widespread.