Proposed regulations governing Taiwan STOs

At the end of 2018 we wrote an article regarding crowdfunding in Taiwan. We questioned whether in the future Taiwan might allow companies to raise funds through ICOs conducted via crowdfunding channels. Current indications are that the Taiwan Financial Supervisory Commission (the “FSC”) intends to regulate such ICOs, commonly referred to as security token offerings (“STO”), separately from crowdfunding. However, the general regulatory framework to be applied to STOs bears a significant resemblance to the existing crowdfunding rules.

On April 12 of this year, the FSC held a forum to discuss the key elements of the proposed STO regulations. The following proposals were discussed:

  1. Exemption from registration. An STO through which an issuer attempts to raise NT$30 million (approximately US$1 million) or less (a “SmallCap STO”) would be exempted from the registration requirements of Article 22 of Taiwan’s Securities and Exchange Act. STOs in excess of NT$30 million would be subject to the requirements of Article 22 and required to enter Taiwan’s regulatory sandbox.
  2. Permissible securities. STOs would only be permitted with respect to two types of securities: (a) fixed-interest debt and (b) profit participation rights. It is important to note that profit participation rights are not tantamount to equity share rights. Profit participation rights would not convey any of the control rights associated with share ownership, but merely convey rights to economic participation.
  3. Permissible investors. Only professional investors would be allowed to invest in SmallCap STOs, and individual investors would be limited to investing NT$100,000 (approximately US$3,000) per STO.
  4. Exhange trading. It is envisioned that security tokens issued in an STO would be exchange tradeable. Trading of SmallCap STOs would have a daily trading volume limit of fifty percent (50%) of the original issue. Securities issued in other STOs may be tradeable in the future pursuant to regulations formulated in connection with Taiwan’s financial sandbox.

The FSC plans to formalize and adopt the new STO regulations by the end of June of this year. Members of the business and legislative communities have already begun calling for increasing the SmallCap STO monetary threshold as well as loosening other restrictions. We will continue to watch this space and keep our clients informed of significant developments.

For more information, please contact Gregory Buxton at

Written May 28, 2019 By Gregory A. Buxton, Ta Yen Wu.