Views of the STO market
#ICYMI Ken Lo from HKbitEX and Robert Lui of Deloitte shared their views of the future of the STO market with our friends over at HKSI and Cyberport during a webinar last week
Both coming from a very traditional background, it was interesting to see each individuals perspective on the up and coming STO trend.
Both sharing about their backgrounds — Ken, coming from traditional finance and consulting companies with Robert from a professional firm, their views concrete the trending view that the Digital Asset market is in a prime position now to make a transition into mainstream finance.
With more regulation coming into effect within Hong Kong, it sets the scene and allows for us to continue building on this Global Financial Centre providing increased opportunities for all market participants. Currently there are over 600 Fintech related companies within Hong Kong with regulatory nods from governmental and financial organisations, cementing the fact that we are on the precipice of change and this industry is here to stay.
Prior to the maturation of the digital asset market, we would see many bad actors within the market in the form of ICOs — remember the period of 2017–2018 when all you would need to raise funds was a white paper heralding how good your upcoming project would be?
We have now gone beyond that because of the introduction of more compliance and regulatory standards. A new asset class with STOs bring about a very different story, with real-asset backed and regulated under security and futures ordinance in Hong Kong, allowing companies to fundraise efficiently and effectively whilst allowing investors to confidently and safely diversify their investment risks.
At their core security tokens are like any other digital asset — with one major difference, security tokens are backed by assets. What can become an STO is very diverse and comes down to what can be digitised. — you may think of the obvious examples, digital asset funds and real estate. However, STOs that offer assets which are traditionally not seen as assets- in their own right become assets.
Security Tokens will also allow access to companies that may be unable to raise funds in the traditional sense, i.e. illiquid assets, pushing forward economic growth within the SME sectors.
For those that are not issuers nor investors, what does this mean for you?
For type 1,4,6,9 license holders, after the opening of the STO markets, opportunities will be provided as new products that will become available adding to the portfolio of diversity that can be offered on the secondary marketplace.
Not only does the STO market create new opportunities for issuers, investors and security license holders, it aids in boosting the overall economy. As new investment products and protections are created, more international HNWI and fund managers will be attracted to the asset class increasing the liquidity within the space and increasing job opportunities in Hong Kong.
How do we know this will work? We’ll take a look across the pond at USA, STOs have become a familiar offering there since the SEC recognised digital assets as an asset class and brought in appropriate regulations, the rise of regulated and licensed digital asset funds like Grayscale, amounting to more than USD 5b AUM to date, are signals that people are definitely embracing and adopting this asset class.
Coming back to Hong Kong, with the SFCs position paper and players such as HKbitEX aiming to bring a safe, compliant, institutional-grade trading exchange platform, it’s an exciting time for the STO market.
Interestingly, parallel to the imminent STO market in Hong Kong, central banks in Japan, Singapore and even China have already begun their exploration into digital assets and how the blockchain can be used to improve the operations of various products.
China whose position was previously to outright ban digital assets has now softened its position by producing and mass adopting the use of DCEP (their own national digital currency) one of the worlds firsts and is demonstrating a willingness to embrace this market.
An STO offering will change the face of fundraising, and the economy for the better. This is the vision and dream that we all share at HKbitEX, a team comprising of professionals who have the same mission to create a safe, regulated and suitable offering for the Hong Kong Market.
One of our wishes is to help pioneer digitisations of companies and hope that we can continue on this unstoppable wave and remain at the forefront of disruptive fintech innovation for Hong Kong’s capital market, continuing the reign of being the best fundraising arena on a global basis.
