The token issued through Security Token Offering (STO) is identified as securities for its features of investment and liquidity and falls in the regulated activities of securities and exchange laws. In other countries, the issuance and relevant activity of STO is required to comply with existing securities and exchange laws, instead of setting up a new governing regulation. In some countries, regulation sandboxes are adopted. Financial Supervisory Commission Taiwan has studied regulations in other countries and practices and enacted the regulations of STO in Taiwan. FSC has drafted the regulations governing Security Token Offering (STO) in Taiwan and planned to adopt a tiered approach to regulation and supervision. Any issuer with the amount of funds raised less than NT$30 million are exempted from obtaining an effective registration with issuing of securities according to Article 22, Section 1 of Securities and Exchange Act. Any issuer with the amount of funds raised more than NT$30 million are required to apply for sandbox experiment by the Financial Technology Development and Innovative Experimentation Act, and should comply with the Securities and Exchange Act after successful completion of their sandbox experiments.

Regulations for any issuer with the amount of funds raised less than NT$30 million are as follows.

1.Issuance Regulations：

(1)Issuer：Public or non-public company limited by shares organized and incorporated in accordance with Taiwan’s Company Act (not including TWSE and Taipei Exchange’s listed companies and Emerging Stocks).

(2)Restrictions of Fund-raising Amount for Investors：Considering investors’ rights and other countries’ regulations, only professional investors are allowed to invest STO fund-raising projects. Each fund-raising project for a natural person can not exceed NT$300,000. Only NTD is acceptable as single payment form.

(3)Issuing Procedures：Any issuer is restricted to rasie funds in one platform. The qualifications of issuers are examined by platform operators. If any platform operator issues its tokens, it must be examined and approved by Taipei Exchange.

2.Regulations on trading：

(1)Trading methods：Platform operators are required to apply for and acquire a license for securities dealer to conduct price negotiation on STO and platform operators must be one of the counterparties in a transaction. In addition, for the purpose of market reference and price discovery, platform operators should provide reasonable bid-offer reference prices based on professional judgment and market conditions. Furthermore, each STO is limited to be traded on a single platform.

(2)Limitation：A natural person meeting the criteria for professional investor can only hold each STO up to NTD 300,000. In addition, the daily trading volume of each STO cannot exceed 50% of the total number issued.

(3) Trading halts：To stabilize the STO with abnormal price fluctuation, a trading halt with two phases will be implemented.

3.STO marketing agencies：

(1)Qualifications: A securities dealer license shall be obtained, with a minimum paid-in capital of NT100 million and the deposit of operation fund of NT10 million.

(2)Restrictions of Fund-raising Amount for Platform Operators：Any single platform can only approve STO fund-raising projects up to NT$100 million. Any single platform is allowed to accept second STO projects after the tokens issued by initial project have been traded over 1 year.

(3)The transfer and storage services：To safeguard the rights and interests of investors and secure the trading records, platform operators should enter into a contract with Taiwan Depository & Clearing Corporation (TDCC) and transfer the trading data such as the change and balance of STO to TDCC to make a backup. TDCC should allow investors to inquire about STO balance in order to assist them to confirm the correctness of their STO trading records.

4.STOs are only subscribed and transacted with identity certification, and the wire transfer should be denominated in NTD and conducting with the same identity bank account, in order to mitigate the ML/FT risks, to prevent the possibility for criminals to launder their illicit income by anonymous transactions of virtual assets, and to avoid the difficulties of providing and investigating the resource of funding.

5.Regulations regarding issuing, trading methods and restrictions, and platform operators’ supervision will be authorized to Taipei Exchange to formulate.

FSC announced a new regulation on July 3, 2019, defining STO as securities depicted in Article 6 of Securities and Exchange Act. For regulations, such as Standards Governing the Establishment of Securities Firms, Regulations Governing Securities Firms, Regulations Governing Responsible Persons and Associated Persons of Securities Firms,and Regulations Governing Centralized Securities Depository Enterprises will be amended and given notices to public comments according to administrative procedures. After the fulfillment of public comments period, above regulations, together with Taipei Exchange Regulations Governing the Conduct of STO by Securities Firms, and other relevant regulations will then be enacted.