How do block chain enterprises understand STO and its impact board and their impact

Editor’s note: This article comes from ID:iqklbs, the author of this article: chain law team, editor: Li Zhao, Odaily Star daily is authorized to reprint.

 How do block chain enterprises understand STO and its impact board and their impact

STO and Ke Chuang board

The full name of STO is Security Token Offering. The meaning of the three words is securities, tokens, and distribution. Compared to the traditional securities issue, the difference lies in the “Token”, but it needs to be stressed that “Security” means that “Token” is also in accordance with the relevant regulations of the securities.

According to the “Securities Act of 1933 (” SECURITIES ACT OF 1933) section 2 (a) (1) the definition of:

“Securities means any notes, stock, inventory stocks and bonds, corporate credit bonds, debt obligations, profit sharing agreement rights certificate or certificate of participation in securities as collateral, credit certificate, certificate form or subscription books, transferable shares, investment contracts, equity securities trust certificate, certificate of deposit, oil gas, or other mineral rights, or a small amount of interest accrued in general, is generally considered to be” any rights and negotiable instrument “, or any of the above securities or certificate of participation, temporary or interim certificate, receipt and guarantee certificate, or a warrant or order right or the right to buy. “

China’s “Securities Law” by the way of enumeration of the definition of securities, according to the provisions of Article 2 of this law, securities including stocks, corporate bonds, government bonds, shares of securities investment funds, securities derivatives etc..

Since all of the above concepts are difficult to understand, the chain law team believes that the definition of securities as a “equal, transferable and tradable property rights voucher” is easier to understand. Generally, the stock has the liquidity, profitability and risk.

STO and a board we discussed at present, are actually discussed both to “block chain company” the impact and significance. Therefore, it is necessary to “block” the concept of chain company clearly.

According to the Institute of ICT blockchain white paper, block chain companies include: 1) to block chain technology, platform as the main products and services; 2) core business mainly depends on the block chain technology company; 3) other companies, business focus on industry chain blocks such as training, media, investment etc..

From the successful case of STO, and combined with the relevant laws and regulations, STO is suitable for certain assets or have stable cash flow, and to adopt the block chain technology companies. Its essence is to be publicly issued through the legal and regulatory tokens to achieve the purpose of financing.

After the main board, the gem, the new three board and the regional equity market, the company’s capital market is a new component of the capital market system in China, which is mainly oriented to the strong scientific and technological innovation ability and the high growth enterprise. As far as this requirement is concerned, the block chain companies seem to be in line with their threshold.

In the Shanghai Stock Exchange issued a “Shanghai Council on the establishment of branch board and pilot registration system and other matters to listen to the views of the industry” in an article pointed out that “we believe that not only as a branch plate plate, should be an independent market, to take Chinese capital market reform and innovation of the task, there should be regulation a new logic, independent market positioning and system. Board should focus on national innovation driven innovation strategy and the development of science and technology, the early opening of “seeking quality not quantity”, members should do listed reserves, a declaration of a mature. “

Independent market positioning and the supervision system of logic, new, the block chain company branch board, leaving the feasibility of suspense.

Compared with STO, by the board of both the same point, also has its unique features. As far as the same point is concerned, there are two main points: one is that both of them provide a channel for new high-tech start-ups, and the two is that both of them are under regulation and according to the law, which is different from the 1CO that prevailed in the block chain industry.

At present, the capital market in the United States to “registration system” principle, “exemption” as an exception, “STO” is the exception; Chinese capital market with “approval system” to the principle of “registration system” as an exception, “board” is the exception section.

The pilot “Kechuang board” is a major feature of the branch board. The basis of the registration system is the principle of public disclosure of mandatory information, which emphasizes that when the issuer applies for the issue of stock, it must declare the public information to the SFC according to the rules and according to the rules. The latter’s duty is to make a formal review of the comprehensiveness, accuracy, authenticity and timeliness of the declared material, without substantive audits of the issuer’s qualifications and value judgment (as distinguished from the approval system), and leave the good and bad of the issuer’s stock to the market judgment.

Shares issued by the approval system to the registration system reform began in the United States for 1933 years the stock market reform, the registration system from the public offering of securities registration or exemption from the provisions of the securities law for 1933 years, in the constitutional decentralization mechanism of federal and state government, the United States company issued shares, in addition to small issue exemption from registration. Outside, in two aspects of federal and state registration at the same time.

Among them, the Federal Register for information disclosure, the federal securities regulation right is strictly limited, and the State Securities Issuing Supervision generally implement substantive audit.

China’s securities market is gradually growing up in the reform and opening up and modernization construction, has a special historic background and cause, first implementation of the examination and approval system. In March 16, 2000, China Commission issued “on the issue of” Chinese commission stock issuance procedures “notice”, which also marks China’s stock issued by the approval system began to shift to the approval system.

The approval system for drawing on the one hand, the registration system of mandatory disclosure principle, on the other hand is also required for the issuance of stock companies must comply with the laws and regulations of the China Securities Regulatory Commission conditions. The China Securities Regulatory Commission in the form of review, but also pay attention to the issuer of the corporate governance structure, the nature of business, capital structure, development prospects, the quality of management personnel, the company competitiveness, and according to the content of pedestrian compliance with the conditions of issue of judgment, the principle of compliance management.

The approval system reform, the establishment of the registration system, the approval system reform is complete system, adjust the interest structure which contains the change, uphold the concept of value. In general, the reform of the registration system of securities issuance reflects the following characteristics:

First of all, the reform of stock issue registration system from the approval system to the concept of stock market efficiency and investor equity protection. It can better clarify the advantages and disadvantages of government supervision and market self-regulation, and realize the decentralization of securities regulation between government supervision and market self-regulation, and finally realize the efficiency of the stock market and the equity of investors.

Secondly, the reform of stock issue registration system from the approval system to the subject of administrative regulation decentralization. The excessive concentration of power control and administrative supervision of the securities market, major changes slow, cannot achieve true purification of the securities market, investors are not fundamentally curb fraud phenomenon, but the formation of “non market ills audit period is long, the abuse of power”, which greatly increased the stock issuance costs.

Finally, the stock issuance registration system reform marked by the approval system to the registration system is the supporting system.

Although the same is a financing tool, but there are obvious differences between the two. From the current point of view, is still in the stock exchange platform by tradition, it is to provide a financing channel for some domestic innovative start-ups. STO is the combination of security tokens, block chain technology, in accordance with the requirements of laws and regulations, through public offering tokens, achieve the purpose of financing.

According to the above, we find that both the STO and branch board, are focusing on the same problem – help corporate finance. On the financing problem, we have previously released “doors” blockchain company listed on the paper on issues related to the analysis and discussion, here, we combine the STO and branch board, then do some supplement.

Under the supervision of the feasibility

We can think of the blockchain company to explore the effects of STO on the board and the branch from two dimensions, namely STO and branch board can solve the problem, which can not solve the problem.

We must be clear, the purpose of which is to get companies to issue securities necessary for the development of the capital, the cost share of future profits or payment of the price. The value of the company’s earnings outlook, which is the value of the company’s credit. The so-called credit refers to the expected possibility to perform the contract.

From the perspective of rational investors, the investment in securities must also focus on the above two points. From this level, whether it is STO or by a board, it can only improve the financing channels, of which there are two reasons:

  • First, in addition to the blockchain technology itself prospects, STO and branch board can not enhance corporate earnings outlook and credit. At present, a notorious 1CO boom and the present virtual currency market bear market, to a certain extent, will also affect investors’ judgment on earnings prospects and corporate credit.

  • In section two, in the case of Alipay, the credit sesame credit judgment reference is the user of the past. The block chain technique could reduce some trust cost, but can not fundamentally improve the enterprise credit.

Taking asset securitization as an example, in this process, the securities issuer usually needs to increase the credit rating. The credit rating means that the debtor will pay the debt and interest on time by means of various means and financial instruments to improve the quality and security of the asset securitization transaction, thus obtaining a higher credit rating.

The common way of credit enhancement includes internal and external levels, the core of the internal increase is to increase the collateral or to adjust between the various trading levels; the common practice of external enhancement is to provide credit guarantees, such as financial insurance and third party guarantee, from the subject of the securitization sponsor to the asset certificate issued by the ad hoc organization.

Both the STO and the future branch board, block chain companies are facing the same problem.

Therefore, the STO solution is the token issue must be performed in under the supervision of the project to conduct compliance review, the project team members to conduct background checks, project enterprises have corresponding reliable assets. The United States Commission recently in both positive and negative aspects of the move also illustrates this point, on the one hand, the disclosure of a clue, visible from the already successful STO project information such as tZERO; on the other hand, the investigation of illegal items.

The continued interest in digital assets violations of the federal securities laws, also consider actions have the similar behavior of enterprises, from the recent CarrierEQ Inc. (Airfox) and Paragon Coin Inc. two 1CO can also be seen in the punishment of enterprises.

The branch board, after the first financial reports mentioned in the Yangtze River Delta for enterprises branch will be considered when the principal business, business income, net profit, accounting for R & D investment income ratio, the number of invention patents have been authorized, the intermediary industry rankings, a number of indicators. Whether these indicators can be reached, will also affect the blockchain company in the future whether the branch board.

It is worth mentioning that, when asked what the company will receive in the process of collecting enterprise by the Commission by letter consultation letter, the answer is “the first financial technology in the local team is relatively stable and become an independent school, R & D team background is strong” these two companies seem to fit and block chain.


From the small and medium-sized enterprise development process, its financing is a worldwide problem, long-term, has its historical and logical origin of this problem, it is difficult because of a new technology or platform completely resolved in a short time.

In early 1930s, the world economy into a depression, to get rid of economic crisis, the British government conducted a survey of the assigned “financial industry committee” of the British financial system and the situation of the enterprise, and issued a report, the report named chairman Sir Mcmillan, this is the “Mcmillan report”.

Report that the British capital supply side would not put forward to the small and medium-sized enterprise conditions to provide funds, small and medium-sized enterprises is always funding gap exists in the process of development, the gap is known as the “Mcmillan gap”.

In fact, this gap so far in the world still exists to varying degrees, especially in some countries and regions. China’s small and medium-sized enterprises financing difficulties financing problems and distinctive characteristics of China, both micro operation and macroeconomic factors, both market mechanism and system defect factors existing in the economic transition and promote the survival of the fittest financing expensive financing, also lead to adverse selection under Gresham’s law of financing financing your.

The successful case of STO can give us more reference, branch rules not specific landing board to give us more room for imagination.

The chain team Pang Lipeng lawyers believe that as two channels of corporate finance, from the current point of view, may provide a variety of choices for block chain financing (possibility). And this choice, also affected the block chain company to legal compliance to the direction of development. When the return to rational, embrace regulation, hard skills to become the main tone of the market chain block, maybe it will in future period.


1. (Lei Xinghui, Chai Tian Ze: the reform of the stock issuance registration system: the regulatory decentralization and the supporting system under the balance of interests, the economic issues, 2016 tenth, below thirty-fifth pages).

2, (Lv Jinsong: “on the difficulty of financing for small and medium enterprises, thinking about the expensive problem of financing”, “financial research”, eleventh, 2015, 115th pages.

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