Cathay Securities Corporation has gained approval from Taiwan's Financial Supervisory Commission (FSC) to operate Security Token Offering (STO) services, making it the first securities firm in Taiwan to do so.

The inaugural STO, led by Grinnodot, the parent company of Sunnyfounder, introduces the loosely translated "Sunshine Green Benefit Debt STO."

This initiative features a six-year debt structure, a 3.5% annual interest rate, and a fundraising goal of NTD 30 million (approximately $900,000 USD).

Chen Chun-yi, Deputy Manager of Cathay Securities' Digital Assets Department, notes that to attract corporate participation, subscribers to this STO can benefit from favourable market conditions.

This potentially increases the annual interest rate to 5.8%.

The fundraising campaign is open until December 8, with the official issuance scheduled for December 12 on Cathay Securities' proprietary STO trading platform.

Are STOs Tradable Securities?

Cathay Securities Chairman Chuang Shun-yu explains that the FSC's 2019 regulations define STOs as tradable securities.

This allow platform operators to apply for self-operating licenses.

Businesses can then issue security-based virtual currencies to professional investors.

The fundraising limit for one STO is NTD 30 million (approximately $900,000 USD) every six months, in line with Taiwan Stock Exchange guidelines.

Chuang highlights the global trend of STOs, regulated in over 10 major markets, including Taiwan, the United States, Singapore, Hong Kong, and the United Kingdom.

Unlike traditional Initial Public Offerings (IPOs), Security Token Offerings are tokens that are digitally stored, exchangeable, and have immediate transferable value.

They involve investment attributes like capital contribution, collaboration in ventures, profit expectations, and reliance on issuer or third-party efforts.

Building On Blockchain Together

Covering issuance, negotiation, declaration, settlement, internal control, and risk management, this platform provides an alternative fundraising channel for businesses beyond conventional listings.

To set credible STO interest rates, Cathay Securities is collaborating with risk management tech giant Numerix and Prof. Yeh Tsung-ying from National Chung Hsing University.

SEE: Prof. Yeh Tsung-ying from National Chung Hsing University.

Together, they've purportedly developed Taiwan's first STO valuation model, with an accuracy of 95% in calculating the probabilities of defaulting for small and medium enterprises.

Senior Vice President Yao Hsu-chieh from Cathay Financial Holdings sees Cathay Securities' STO approval as the group's first step into digital assets.

As of October, the Cathay Financial customer base has surpassed one million.