Financial Supervisory Commission of Taiwan awards first securitized token license

Taiwan’s financial watchdog, the Financial Supervisory Commission (FSC), has awarded the country’s first security token offering (STO) license to Cathay Securities.

According to local news reports on Nov. 9, Cathay received regulatory approval for its “Sunshine Green Yield” STO bonds with a time to maturity of six years, initial annual interest of 3.5%, and an initial principal amount of 30 million New Taiwan dollars ($930,000).

Through the token subscriptions, enterprise owners can purchase green electricity on the market for environmental, social and corporate governance initiatives under favorable conditions and receive variable interest rate payments of up to 5.8% per year. Trading for the Subshine Green Yield bonds will debut on Dec. 12 on Cathay’s in-house STO exchange platform.

Since 2019, the FSC has classified tokenized assets as securities, with an open pathway for financial institutions to apply for licensing. However, issuers must comply with a $930,000 fundraising limit and only conduct a maximum of two STOs per year. The offerings are also only available to enterprises and accredited investors, and in the case of the latter, they can only purchase a maximum of $9,300 STOs.

To create credible STO interest rate pricing, Cathay Securities partnered with risk-control technology company Numerix and National Chung Hsing University professor Ye Zongying to develop Taiwan’s first STO evaluation model. The firm claims that the model is “95% accurate” in calculating the default probability of small and medium-sized businesses.

Founded in 2004, Cathay Securities is one of the largest financial services firms in Taiwan. The company serves millions of investors and brokerage clients.

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