[STO Summit] STO experts say, “STO has already started, need to proceed it right away”

[Source] https://www.edaily.co.kr/news/read?newsId=03273446635804408&mediaCodeNo=257

The U.S. and Europe achieved ‘rapid institutional improvement’ and the blockchain industry is developing

Domestic STO market, cold start with limited legislation

“Regulatory authorities must respond faster to protect investors and stabilize the market.”

[Edaily Market-in Reporter Park Mi-kyung] [Economist Market-in Reporter Song Jae-min] Overseas advanced markets such as the United States and Europe are supporting the development of the blockchain industry by introducing legislation tailored to virtual assets one after another. On the other hand, it is pointed out that in Korea, only some businesses that have passed the regulatory sandbox are allowed on a limited basis, and there is a lack of specific legislation and systems for virtual assets, leaving a loophole in investor protection.

Leading US and EU lay the foundation for rapid development of blockchain industry

Domestic and foreign STO experts pointed out the differences in the legal status of domestic and overseas token securities markets at the panel discussion of the ‘Edaily Global STO (Security Token Offering) Summit’ held at KG Harmony Hall, KG Tower, Jung-gu, Seoul on the 10th.

In the United States, the Uniform Commercial Code (UCC) was recently revised so that STO transactions are not restricted by individual regulations and provisions that exist in the 50 states in the United States. Previously, STO transactions were permitted based on the existing securities law, but the law was revised to further clarify the concept of ownership of STO, a new digital asset, and to strengthen transaction stability.

Daniel Stabile, partner at Winston & Strawn, said, “There were too many laws and regulations in the U.S., which limited the STO business and required overhaul. Also, there were many limitations in trying to apply the securities laws created in the 1940s to new technologies.” He explained.

“To solve this problem, legal scholars and various academics came together to create a safe STO transaction model,” he said. “The revisions focused on safe transactions and virtual asset management, and legislative revisions focusing more specifically on digital assets are in progress, but will take several years.” “It looks like it will take longer,” he predicted.

The European Union (EU) Parliament approved MiCA (Markets in Crypto Assets), a comprehensive regulation of virtual assets, on April 20 (local time). As a result, Europe became the world's first major market to introduce customized regulatory legislation for virtual assets. With the implementation of the ‘Distributed Ledger Technology (DLT) Pilot’, which allows the issuance and distribution of STO-based technology using blockchain, the foundation for the development of related technologies has been laid.

“There is widespread consensus in the EU that blockchain technology is an important tool for innovation,” said Louth Scanning, CEO of DigiShares. “So we are conducting a lot of experiments and trying to adopt (the results).” “The EU is making rapid progress and is working to implement harmonized regulation of virtual assets,” he explained.

He continued, “Many countries in Europe have their own regulations, but are moving in the direction of supporting digital assets. So the range of assets that can be tokenized is broadening, and I think this is a very important direction in relation to STOs.” said.

[Edaily Reporter Lee Young-hoon] Attorney Han Seo-hee of Barun Law Firm, Daniel Stabile, partner of Winston & Strawn, Klaus Scanning, CEO of DigiShares, Kim Dong-hwan, attorney of Delight Law Firm, and Cha Sang-jin, attorney of Becom Law Firm, held a meeting at KG Tower in Jung-gu, Seoul on the afternoon of the 10th. At the '2023 STO Summit', a presentation is being made on the topic of 'Global STO Legislation Status and Prospect'. The '2023 STO Summit', hosted by Edaily and Edaily TV, is an event where global token securities companies come together and put their heads together to find solutions. 15 overseas speakers and 22 domestic speakers from the US, Europe, Singapore, and China attended. It will be held until the 11th.

◇ Domestic market with many STO restrictions... Must hurry to revise laws and improve regulations

On the other hand, in the Korean market, there are still many restrictions on the expansion of blockchain technology and related industries.

Seohee Han, an attorney at Barun Law Firm, pointed out, “In Europe, the viability of public blockchains was virtually acknowledged with the pilot implementation of distributed ledger technology (DLT),” adding, “On the other hand, in Korea, authorities are restricting the use of public blockchains.”

He then pointed out, “Even in the case of the STO market, only some businesses are possible in a limited way through the financial regulatory sandbox, so there appears to be a need for the law and regulatory system to be reformed more quickly.”

According to the STO issuance and distribution discipline system announced by the Financial Services Commission in February, the issuance of investment contract securities and non-monetary trust-type beneficiary securities is expected to be possible in the future. However, as there are not many concrete standards or concepts yet, it is assessed that there are many obstacles to overcome in order for actual issuance and distribution to proceed smoothly.

Sangjin Cha, an attorney at Bcom Law Firm, said, “In the case of investment contract securities, it is a completely different concept, so there are likely to be difficulties in the future. “Submission of a securities report itself will be unfamiliar to companies, and there will be difficulties in reviewing it from the perspective of the supervisory agency that accepts it,” he said. “Even in the case of non-monetary trusts, it does not seem easy to find a trustor or adjust the payment of fees.” evaluated.

He continued, “The current direction presented by the Financial Services Commission announced that traditional securities can also be tokenized. In addition, the possibility of the emergence of new types of securities other than investment contract securities is also mentioned,” he explained, adding, “For the time being, it is expected that most types will be resolved into investment contract securities and non-monetary trusts.”

It was also pointed out that STO-related legislation and systems should be improved more quickly to protect investors. Even if it is limited, if it has already begun, an institutional network must be established to improve the market and protect investors.

Kim Dong-hwan, a lawyer at D'Light Law Firm, said, “As the positions of Korea's financial institutions and authorities were resolved last year, many various products such as copyright profit payment claim trading platforms and art sculpture investments were released. Of course, they are not connected to the international market, but many attempts are being made. It came true. Considering this, it is realistic that the government needs to take a more active role and quickly overhaul it,” he pointed out.

He continued, “Business models handled by STOs, such as investment contract securities and new types of beneficiary securities, are not institutionalized. “There is an aspect that increases the likelihood that digital assets based on these business items will be issued and distributed in the market as is,” he said. “The longer the institutionalization of the law is delayed, the more likely it is that token securities will be distributed in the general virtual asset market, which is also disadvantageous for investor protection.” There is a side. “Only when the legal system is institutionalized quickly will the STO market be stably established and the virtual asset market will become cleaner,” he said.

Copyright © 2023 Alchemic Investments Co., Ltd. All rights reserved.