Security token offerings (STOs) are not merely a technical change. It means securities firms now have a powerful weapon to break out of the mold of the traditional domestic capital market and directly target the global asset market.
Lee Yong-jae, head of the digital asset business division at Mirae Asset Securities, assessed the business ripple effect that the Electronic Securities Act amendment and the Financial Investment Services and Capital Markets Act amendment, which passed the National Assembly in Jan., will bring to the domestic securities industry in this way. As the legal effect of the distributed ledger (Blockchain) is recognized, the assessment is that securities firms have now gained vast territory to commercialize a variety of new types of asset that were difficult to accommodate with existing systems.
Lee picked over-the-counter brokerage and tokenization of revenue securities as the core business models of this legal revision. He noted, In the initial stage, the tokenization business will unfold around non-monetary trust revenue securities whose marketability has already been verified, such as real estate and music copyrights.
Lee said, Holders of underlying asset want to borrow the high trustworthiness, internal control capability, and marketing power of securities firms, adding, Mirae Asset is building a tokenization solution to help them tokenize asset as a new revenue model. The logic is that the securities firm's leadership is not weakened; rather, it becomes an opportunity for its business scope to expand into technical support and consulting.
As the future shape of finance, he presented T+0 (instant settlement) and convergence with stablecoins. Lee emphasized, If securities and money are tokenized and move simultaneously on a Blockchain network, trading 24 hours a day, 365 days a year becomes possible without settlement delays, and It will open an era in which investors worldwide can easily invest in tokenized global blue-chip asset without constraints of time and space.
He said, Five years from now, MTS (mobile trading system) will have evolved into an investment platform based on Blockchain infrastructure. The following is a Q&A.
The Electronic Securities Act and the Financial Investment Services and Capital Markets Act amendments passed. What do they mean for the securities industry?
The two bills respectively established the two pillars of issuance and distribution. With the Electronic Securities Act amendment recognizing the legal effect of Blockchain, a new issuance method called security token offerings (STOs) was formalized. The Financial Investment Services and Capital Markets Act amendment breathed life into the previously nominal investment contract securities by applying distribution regulations. In particular, the creation of a license for over-the-counter brokerage is key. Now, if you go through a licensed broker, multilateral negotiated trading will be possible over the counter. Institutional uncertainty has been lifted, effectively opening a full-fledged market.
Larry Fink, chair of BlackRock, said the future of finance is tokenization of asset. What innovation will investors feel?
It is the era of T+0 (instant settlement) in which settlement delays disappear. Currently, stock transaction takes two days (T+2) from execution for the money to arrive. But if securities and money (stablecoins) move on the same Blockchain, settlement is completed immediately upon transaction. Just as consumers who experience overnight delivery cannot go back to standard shipping, investors who experience real-time settlement will not seek past methods. Also, a market that runs 24/7/365 becomes technically possible.
Which area of security token offerings issuance are securities firms focusing on first?
This approval is limited to revenue securities. Accordingly, securities firms are likely to prioritize tokenizing underlying asset in non-monetary trust revenue securities that already have issuance precedents, namely real estate and music copyrights. This is because building market trust by tokenizing asset that have already been verified comes before unfamiliar asset.
An issuer account management institution system has been created in which the issuer directly issues tokens. Won't this threaten securities firms' lead-managing role?
On the contrary, it will become a new cooperation model. Rather than the holder of underlying asset building a system directly, they want a securities firm with expertise and trust to act as issuing agent. Mirae Asset Securities is also preparing a business to assist their issuance through a tokenization solution. It is a process of growing the pie, not a threat.
What should be prepared during the one year left until the law takes effect?
Investor protection system, first and second. As the infrastructure changes, gaps between existing systems and Blockchain technology must be filled. It is also urgent to build a general-purpose platform that can accommodate various underlying asset and to establish fair valuation standards for unstructured asset. That value directly becomes the investor price.
Not long ago, Mirae Asset Securities was cited as the biggest beneficiary in the STO era. What is your strategy?
We see Blockchain not as a mere technology but as the core of a leap forward. Mirae Asset Group has a global network managing 1,160 trillion won in asset worldwide, and Mirae Asset Securities' strength is that it is the only domestic financial company with a division-level business and development organization. Blockchain has no borders. The goal is to enable investors worldwide to invest in the blue-chip asset we tokenize without constraints of time, space, or currency.
In an environment where STOs have gone mainstream five years from now, how will the investing landscape for retail investors change?
At first, an STO tab will coexist in MTS (mobile trading system), but as the market matures it will evolve into a Blockchain-based integrated investment platform that does not need existing infrastructure. Whether it will be called MTS or a wallet, an era will come when a single app can trade a wide range of asset around the world, 24/7. The journey of the entire financial industry moving onto Blockchain has already begun.