[HKBCS 2018] STI Financial Group says STO not limited to financial assets

After the meteorite fall in initial coin offering (ICO) and cryptocurrency market, security token offering (STO) is believed to be the next buzzword. Cyrus Wen, Partner of asset management firm STI Financial Group, sees the room of development for security tokens.

Security tokens do not replace traditional asset classes, but are rather the virtual or digital form of traditional assets, Wen said in an interview with CoinsNetwork, ‘security tokens can grow into a portion of the entire traditional asset space, not just financial assets.’

Theoretically, STO aims to improve the liquidity of illiquid assets like real estate, by combining tradition and innovation elements.

Cyrus Wen, Partner of STI Financial Group

Wen pointed out that STO uses blockchain technology to digitalize traditional assets, which can reduce settlement time and overall costs, hence more efficient. As such, security tokens will attract more people to adopt, which in turn will increase liquidity and even liquidity premium.

Some institutional investors such as Goldman Sachs have shown their interests in crypto assets. The investment bank said in September that it is working on a type of derivative for Bitcoin in response to increasing demand of customers. Nonetheless, institutional investors are generally cautious about cryptocurrencies.

It seems that the watchful attitude of institutional investors does not surprise Wen. ‘Institutional investors are never afraid of missing opportunities.’ He commented, ‘ it is always okay to be the latecomer of the space.’

More importantly, institutional investors cannot afford the legal and regulatory risks by taking the initiative, according to Wen. The approach of institutional investors is to either acquire successful startup companies in the space or to replicate and implement their models. He thinks that it would not be too late for the big players to enter when technology and regulations are mature and ready.

In November, the Securities and Futures Commission (SFC) in Hong Kong issued guidelines to include crypto asset portfolio management companies and fund distributors in regulation, together with a conceptual framework for possible regulation of virtual asset trading platforms.

Wen believes that the SFC has never changed its stance which is to regulate all activities regarding the nature of securities and futures. The watchdog wants to inform the market that they would regulate securities and futures of all crypto assets and protect the interest of investors in terms of usability.

While from his point of view, Wen welcomes the SFC’s recent move which brings clarity and a lot of certainty to the market by giving out clear guidance to participants and defining do’s and don’ts for related activities.

Although STI Financial Group itself has no intention to directly involve in the crypto space, they are one of the investors of Plutux, a cryptocurrency exchange, Wen mentioned.

According to the roadmap, the exchange hopes to convert from a utility token exchange to a security token exchange and eventually become a digital asset management platform, expecting within the time of one to two years.

He continued, Plutux scheduled to launch as a utility token exchange in November, but because of the SFC new guidance, they changed their plan immediately and hope to enter the SFC’s sandbox which allows the exchange to directly become a security token exchange. Plutux will at the same time deal with utility token transactions.

“Hopefully (the exchange will become a security token exchange) early next year,” Wen said.

Cyrus Wen will participate at the ‘Hong Kong Blockchain Summit 2018’organized by CoinsNetwork, Bloomberg Businessweek/ Chinese Edition and Hong Kong blockchain consultant and investment company BlackHorse Group on December 12 this year. He will share more about the new trend of STO, along with other renowned speakers at the conference to share the latest trends in the blockchain industry.