A new association in Japan brings significant institutional support to security token offerings (STO), just months before regulations on the public sale of coins in the country are to be implemented.
On Oct. 1, six major Japanese brokerages, including Nomura Securities and Daiwa Securities, formed the Japan STO Association, a self-regulatory organization (SRO) for STOs.
Old and new are joining forces in the grouping. In addition the two core members of the brokerage establishment, the association also includes a number of younger players, all founded in 1999 and focused on online trading: kabu.com Securities, Monex, Rakuten Securities and SBI SECURITIES.
SMBC Nikko Securities is notably absent from the collaboration.
The association will devise rules and guidelines for the issuing of security tokens. In addition to regulating its members, the group will also take on lobbying duties, endeavoring to develop security tokens as a product and promote their use in the country.
“The Japan STO Association intends to consolidate expertise on securities businesses from among securities companies and other entities so that the STO business opportunities can be explored and developed in Japan”, Monex said in a statement.
Japan has lagged much of the world in terms of coin offerings, as the existing law does not adequately support the public sale of cryptocurrencies. But earlier this year, legislative advances set the groundwork for the issuing of security tokens.
In May 2019, the Act on Settlement of Funds and the Financial Instruments and Exchange Act were amended to regulate the sale of the coins. The offerings will be treated very much like offerings of conventional securities. Certain disclosures will be required, and the brokers will have to be registered.
It is expected that the disclosures might be more detailed than those required for conventional securities given that the structuring and design of the tokens will have to be explained, according to an article by Greenberg Traurig.
Security tokens will be considered “interests in a collective investment scheme”, and the buyers of them will have the right to receive distributions from the business of the issuer.
The new regulations will be in force once implementing orders and ordinances are issued by Japan’s Financial Services Agency.
A Japan Security Token Business Association was formed in January and a Japan Security Token Association was established in May, but both operate more like trade associations than self-regulatory organizations.
Silvergate Bank Resolves Wire Transfer Issue That Kept Transactions in Limbo
Early Friday morning, the bank was unable to process wire transfers for clients because of an outage at bank payments processor Finastra. Silvergate, like many community banks, uses Finastra’s cloud data centers as opposed to hosting those centers on the bank’s premises. When Finastra detected anomalies in its systems as a potential cyberattack, the service provider shut down its system, cutting off wire transfers for Silvergate’s customers.
According to Lane, the La Jolla, Calif.-based Silvergate was one of the first banks on Finastra’s network that became fully operational. Finastra did not respond to request for comment. The bank is one of the few banks in the U.S. totally focused on the cryptocurrency industry, with 804 clients in the digital currency space.
The Silvergate Exchange Network (SEN) was uninterrupted and customers that had funds already on the platform were able to trade, Lane said.
By Thursday, the bank was already 90 percent remote, but the wire desk and technology support team were in the office when the outage occurred. (Bankers are still considered essential workers under California’s statewide shelter-in-place order. Silvergate’s staff is now working completely from home.)
Any of the large crypto exchanges or over-the-counter (OTC) trading desks that had integrated with Silvergate through an application programming interface (API) came online early yesterday morning.
“We have been working on updating our SEN portal so that ultimately at some point this year all of our customers will be able to access the API version through a portal without having to go through online banking”, Lane said.
Despite a crash in both equities and bitcoin, Silvergate remains well capitalized. At the end of 2019, its Tier 1 leverage ratio was 11.4 percent, double the 5 percent ratio that regulators require, according to its fourth-quarter earnings report. The bank’s total risk-based capital ratio is 26.5 percent compared to the 10 percent required.
“Silvergate is very strong, liquid and well capitalized”, Lane said. “The issue we experienced was with a third-party service provider who worked with us around the clock, and everything is working again and we’re open for business.”