STOs coming soon to Taiwan

Written by Matt Fulco || March 20 2019

Virtual currency adoption looks set to accelerate in Taiwan as the island plans to establish a mechanism for security token offerings by mid-year. The move is in line with Taiwan's launch of a fintech regulatory sandbox that allows firms to experiment with novel business models but not fall afoul of existing regulations.

Wellington Koo, chairman of Taiwan's Financial Supervisory Commission, will reportedly meet with fintech entrepreneurs and other financial industry stakeholders in late April to discuss details of the STO fundraising regulations. The FSC plans to lay the ground rules for security token offerings before the end of June, Taiwan's Economic Daily News reports.

Jason Hsu, a Chinese Nationalist Party legislator and leading fintech proponent among Taiwanese politicians, says that STOs represent an opportunity for young Taiwanese to become more involved in Taiwan's capital markets. In general, younger Taiwanese have little interest in the traditional stock market, he says. He encourages the Taiwanese government to develop new exchanges for STOs.

Taiwan also plans to draft regulations for initial coin offerings (ICOs) by June. It first announced those plans in October 2018. The government intends for "virtual tokens to be as easy to invest in as stocks and just as liquid," FSC Chairman Wellington Koo said in a statement. The Taiwanese government considers cryptocurrencies to be virtual commodities or assets rather than currencies, asserting that that the virtual currencies have no intrinsic value. By that logic, their regulation falls under the auspices of the Financial Supervisory Commission.

Gradually, Taiwan is carving out a fintech niche for itself. While the island remains less business friendly than its neighbors, the aspiring fintech hubs of Hong Kong and Singapore, it has superior engineers, lower costs and an excellent quality of life.

A firm push by Taiwanese regulators is needed to fully activate the island's fintech ecosystem. Indeed, Taiwan has more than US$1 trillion in financial assets, but tends to leave the money idle or channel it into rent-seeking activities. Conservative incumbents remain ambivalent about fintech, which they typically view as both risky (because of an unproven business model) and a potential threat. That could change if policymakers press banks to cooperate with fintechs, while moving to further open the island's financial sector to foreign direct investment.