Taiwan's Financial Supervisory Commission (FSC) has granted Cathay Securities the country's inaugural security token offering (STO) license. The approval, reported on November 9, covers Cathay Securities' "Sunshine Green Income" STO bonds. These bonds feature a six-year term, an initial annual interest rate of 3.5%, and an initial principal of NT$30 million (approximately US$930,000). Business owners can utilize token subscription to purchase green electricity under favorable market conditions for use in environmental, social, and corporate governance initiatives. Additionally, they will receive floating interest payments of up to 5.8% per year.
Cathay Securities' Sunshine Green Income bonds are set to debut on the company's in-house STO trading platform on December 12. The FSC, Taiwan's financial regulator, has classified tokenized assets as securities since 2019. This classification has provided financial institutions with a regulatory pathway to apply for STO licenses. However, there are certain restrictions, including a fundraising limit of $930,000 and a cap of two STOs per year for issuers. Moreover, these STO products are exclusively available to businesses and accredited investors. Accredited investors are restricted to purchasing STOs up to $9,300.
To establish credible STO interest rate pricing, Cathay Securities collaborated with risk control technology firm Numerix and Professor Ye Zongying of National Chung Hsing University. Together, they developed Taiwan's first STO evaluation model, which Cathay Securities claims is "95% accurate" in calculating the probability of default for small and medium-sized enterprises. Established in 2004, Cathay Securities is one of Taiwan's major financial services companies, catering to millions of investors and brokerage clients.
