An integrated technology platform to issue, manage and trade tokenized securities

This legal ambiguity has led to some ICO offerers being prosecuted by the SEC as a security offering part, though their tokens were announced as utilities. Such companies include messaging apps Kik and Telegram, the former being sued by the SEC for over $100 million and the latter delaying their offering plans after similar prosecution. Providing an STO instead of an ICO can also add credibility to a token. After the crypto bubble burst in 2018, many investors were left with useless tokens. Because of this, building credibility is key for modern tokens. Whitepaper drafting, smart contract development, token creation, security features, STO dashboard, branding campaign, and token issuance are some of the factors which define the cost of STO development.

A debt token’s price is dictated by ‘risk’ and ‘dividend’; this is primarily because a medium risk of default can’t be priced the same for a real estate mortgage and a bond for a pre-IPO organization. In terms of blockchain, a smart contract lives on the network, which represents debt security. Within that contract, repayment terms are included, dictating the dividend model and risk factors of the underlying debt. After a failed ICO trend which went extinct in 2018, security tokens and STOs started gaining attention as ICOs’ spiritual successor. The platform comes at the time when the new trend is becoming increasingly popular, and it might indicates that the crypto space is ready for the next step in its development. Token Studio is a self-service application that allows users to create, issue, and manage security tokens through a simple, intuitive interface.

The relevant licences in Hong Kong are the Type 1 and Type 7 licences. Given the objective is to achieve a global 24/7 trading platform capability, we expect to see a concentration of listing platforms in key hubs in key regional geographies. Hong Kong is well-positioned to be a key hub for the Asia-Pacific region.

STO Launchpad

Typically, the trustee and custodian will be regulated entities. For example, a security token could represent an indirect ownership https://globalcloudteam.com/ interest in a building. Trading the security token would not mean that there is a conveyance and transfer of title of the building.

The platform is also pointed out to be in complete compliance with US laws and regulations, just like tZERO token which was recently distributed to investors after a 90-day waiting period. Raise funds for business development through security tokens. Integration requirements of the listing platform with the security token to be launched. You will need a listing platform for listing and trading of the security token is a crucial aspect of STO. Not all licensed broker-dealers in Hong Kong are approved to distribute security tokens.

Key Features

In 2020, Security token market cap observed a 500% growth and stood at $449 million. In January 2021 alone, Security token infrastructure companies raised over $30 million in capital. In another report, Plutoneo predicts a CAGR of 85% in the tokenized market in the European Union from 2018 to 2024. The taxation of proceeds of an offering will be treated differently in various jurisdictions.

You will likely need to work with a Issuance Platform, a distributor (broker-dealer), a listing platform, a legal team and a financial advisor. You may also need to work with an auditor, a valuation company is sto cross platform and a trustee. The Securities and Futures Ordinance outlines a long list of categories that are considered securities. One of those categories is likely to apply, and will be considered a security offering.

Be prepared that it might take some time to get the licences. A decentralized STO issuance platform that provides 24/7 access and a legal framework for international investors to buy security tokens, which facilitates and speeds up fundraising for token issuers. Blockchain’s value comes in the form of its role in permanence, security, and transparency — each of them is imperative to confidence, trust, safety, market efficiency, and soundness. It is already being incorporated into the new standard for public security offerings as the benefits are endless and more importantly, the infrastructure is in place.

• A decentralized STO issuance platform that provides 24/7 access and a legal framework for international investors to buy security tokens, which facilitates and speeds up fundraising for token issuers.
• The appointment of auditors and a valuation company will be required for listing security tokens on a listing platform.
• Tokenize art pieces and scale your capabilities to support your business’ strategy and needs.
• The company only has regard to the person entered in the Register of Members as the owner of that share.
• Asset tokenization opens up a plethora of investment opportunities for everyone, from large hedge funds backed by Wall Street to retail investors trading on Robinhood.
• That said, the standard Private Placement Memorandum for a security offering will need to be adapted for the significant and substantial impact of technology.
• However, in 2021, there was a major shift in understanding and investment from the market into the digital securities and security token markets.

You can start first with the legal team, the financial advisor and the issuance platform. You will need to find a licensed corporation that either has specific permission to undertake a security token offering, or is willing to notify the SFC to obtain that. Usually, shares or the share register are not being directly tokenised. It would need the laws of that legal system to accommodate digitisation of each step of the share issuance and share transfer process. A real estate investment is usually locked up for a number of years. Tokenised real estate could be sold wholly or partially at the discretion of the token holder.

To put real world assets into fractional ownership on the Blockchain

The tokens get minted and burned as the holder’s debt is borrowed and repaid. Tokenize bonds or luxury collectible products, offer investors returns through a decentralized marketplace, and derive cash without value loss. Secure your jewelry, coins, and metals assets by tokenizing them for increased purchase transparency or investor engagement. Boost liquidity and let investors easily access fractionalized property deals with reduced transaction costs and lower risks. ICOs do not give investors the right to gain or distribute profits like traditional shareholders.

There are different exemptions for each of the regulated activities. But it is hard to conceive of an exempted structure that would allow a security token offering be launched in Hong Kong, without the persons in Hong Kong doing so being licensed. It is possible to separate legal ownership to shares from equitable interests in or rights to the shares. Only indirect rights linked to shares are being offered widely in the token offering. When that token is traded in the secondary market, then only the indirect interest is being traded, not the legal interest in the share itself. The legal interest in the share remains static, and that legal interest will have restrictions on transfer prescribed by the Articles of Association.

Powered by Polymath

Security tokens are similar to the certificates issued for stocks. For stocks, ownership information is entered into a document as an official certificate of ownership. For security tokens, similar information is recorded, the major difference being that it is recorded on the blockchain and represented by a token. STOs were created in response to the ICO bubble burst in 2018.

We advise on security token implementation feasibility, help design unique solution roadmaps, estimate potential spending, and engineer custom platforms with all business specifics factored in. Security token offering platforms underlie distributed blockchain networks. With offerings great or small you can reach mature secondary market players across the globe. PixelPlex is here to help you use security token services to innovatively revamp your business, no matter its intricacies. Ask us to build a tailored STO platform — we’ll ensure it sits well with your infrastructure while you swiftly reach your specific goals. Regulators today want token offerings to remain compliant with the existing laws and rules around securities — hence, the Security Token Offering was born.

Paving the future of Tokenised Securities;

The professional investor exemption only applies to one regulated activity , only in respect of institutional professional investors , and the person must be acting as principal. That said, the standard Private Placement Memorandum for a security offering will need to be adapted for the significant and substantial impact of technology. But it doesn’t have to be a public company, and usually will not be. A coin is the reward mined in a protocol, and which is then traded. A token is issued by an application built on a protocol, and only operates within that application .

The specific exemptions or safe harbours will depend on the offering itself, and the legal nature of the token. For instance, shares and debentures in a company can rely on safe harbours that are different to securities that are not shares or debentures in a company. Stamp duty is assessed on the transfer of a beneficial interest in shares under Hong Kong tax law. Even though security tokens are not shares, they may represent an interest in shares, and stamp duty may be assessable on transfers of security tokens.

Any offering document issued in connection with a security token offering issued to the public in Hong Kong must be authorised by the Securities and Futures Commission , unless an exemption or safe harbour applies. The promoter should be regulated, or operating through a regulated person. The exchange on which the token is available should be regulated. Then we had the new world coming back to the old world, as FTX cryptocurrency exchange launched tokenized stocks, the first STO launched by a leading cryptocurrency platform. However, in 2021, there was a major shift in understanding and investment from the market into the digital securities and security token markets. The infrastructure that was being built and licensed through the first three years in STO started to come to life and with that, a significant shift in the quality and size of products entering the market.

Introducing the Polymath Capital Platform

Then, the technology that links them needs to be fit-for-purpose. We are not there yet, though many great minds are working on this. Tokenisation allows access to a broader range of people who can participate in asset ownership with potentially lesser costs.

Fractional ownership will allow part of an asset to be made available by tokenisation. This provides the asset owner with different choices on how to approach the market. For instance, an anchor investor could hold a 40% interest, 30% could be released to other key investors, and 30% could be tokenised. A protocol is a technology layer which exists independently without reference to or reliance on other protocols. A blockchain protocol uses blockchain technology, and is built on the internet protocol.

Very few, if any, licensed corporations have this as part of their approved business lines. Yes, if they relate to a subscription for or purchase of a security. Typical language around the classification of the investor, and the nature of the offering, will be critical. The standard Subscription Agreement will need to be adapted for the impact of technology on the process. An offering will not need SFC authorisation if it is limited to professional investors, or is not made to the public in Hong Kong .

While trades are performed quickly, reassigning ownership can take days. With such innovations, Level01 is leading the charge to revolutionize derivatives trading and open this traditionally complex market to wider accessibility. Combining the most powerful technologies into a user-friendly and transparent DeFi platform puts Level01 far ahead of the competition. In all likelihood, Level01 represents the future of the multi-trillion derivatives market.