License, the meaning of the drunkard is not in the wine. Cryptocurrencies such as BTC, ETH are just the first step, and the mystery hidden behind them is the entire financial market.
Before regulation, we see more emerging projects such as NFT, DeFi, which are native to the industry. After regulation, RWA becomes a long-term track worth paying attention to, including security tokens, STO, etc. The market value of the former is currently about half of Apple's market value, while the latter represents the potential of the entire financial market.
—— Hedy Bi, European Cloud Chain Research Institute, at the Bund Summit on September 9th
Despite the impact of macro factors such as the pandemic, Hong Kong, as one of the "new London Harbor" cities once called by the New York Times, may have seen a decline in its status as an international financial center in recent years. However, the determination of the Hong Kong government to maintain this status remains strong. Web3 has been a main racing track for them to "overtake in the bend" since last year. As we mentioned in the previous article, security tokens are not just a technical way, but represent the potential reactivation of the entire financial market.
"The meaning of the drunkard is not in the wine"
The core function of finance is to provide financial support and financing channels for the real economy. Its essence is to provide blood transfusion for the real economy. To truly provide financial support, funds need to flow and be smoothly transmitted in the intermediary process, reducing transaction frictions, and allowing sufficient blood to be delivered in a timely manner.
However, the current financial system still faces some challenges that need to be resolved, such as the high cost of financing, which is an issue that cannot be ignored. Tokenization can greatly increase liquidity and solve the problem of difficult financing. In particular, STO, similar to the traditional IPO, is a typical application of tokenization technology in issuance.
This also means that with the support of regulatory frameworks from the Securities and Futures Commission, tokenization technology will become a button to reactivate the financial market.
The Hong Kong Securities and Futures Commission has a supportive attitude towards this field and actively promotes the practice and implementation of STO in Hong Kong. As an important milestone, the Hong Kong SAR government successfully issued HKD 800 million worth of tokenized green bonds, which are the world's first government-issued tokenized green securities.
The regulations released in June this year are just the beginning, targeting the trading of highly valued cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), etc. What is truly exciting is the second reactivation of the financial market brought by Web3 technology.
Starting from "professional investors" and hoping to be listed and traded on compliant exchanges in Hong Kong in the future, it will also complete the circulation from primary market to secondary market on the chain. STO is not limited to the public issuance of stocks and bonds, but can also be used for the management of private placements to improve their efficiency and transparency. It provides a better choice between the convenience of private placements with low transparency and the high transparency but high cost of public issuances.
STO, not the first practice
STO is not a new term. $17.1 billion, according to STO Market's statistics, is the amount of funds that have been raised through STO, and this is just the beginning of this market.
Source: STO Market
As early as July 26, 2022, OSL Digital Securities Limited (OSGL), together with Animoca Brands, UniCreative Group, and Rich Group of China, successfully issued security tokens based on US dollar bonds. It was the first official STO allowed by Hong Kong regulatory agencies, opening the market for licensed digital asset brokers in Hong Kong to issue and distribute tokenized securities.
From US dollar bonds to real estate, we can see the continuous exploration and experimentation of the Hong Kong market with STO. Real estate, as a financial asset with low liquidity and high transaction frictions, can lower the threshold for investment and exit through tokenization, making it easier for investors to buy, sell, and hold, and improving market liquidity and trading efficiency.
Not only in Hong Kong, but the STO market is flourishing globally, and various regions are actively exploring the application areas of STOs. The luxury hotel St. Regis Aspen, located in Colorado, issued the first project attempting to tokenize real estate ownership and successfully raised $18 million in October 2018. This marks the real estate industry's first attempt at STOs. Similar to the regulations in Hong Kong, US investors are regulated by US securities laws.
On September 4, 2023, Ashley Alder, the CEO of the Hong Kong Monetary Authority, delivered a keynote speech at the Financial Market Summit. During the conference, he mentioned the use of underlying technologies such as blockchain to drive Hong Kong's digitization process as one of the international financial centers.
By using the case of STOs as a microcosm, it can be described using Ashley Alder's theme, "The Vibe is Back".
Note: The news events mentioned in this article are all from public media sources.
