Hong Kong Crypto Exchange OSL Opens Institutions Investment in Security Tokens

OSL Digital Securities Limited (OSL), a major cryptocurrency exchange based in China, announced on Tuesday that it has become the first Type 1 SFC-licensed digital asset broker to offer sales of security tokens to professional investors in Hong Kong through private security token offerings (STOs).

According to the official statement, OSL is the first regulated digital assets brokerage firm in Hong Kong to facilitate sales of new asset-backed digital tokens classed as securities to global institutions.

OSL has been doing that for a while. So far, its institutional clients include the likes of Animoca Brands, Head & Shoulders Financial Group, China Fortune Financial Group Limited, Volmart, and Monmonkey Group Asset Management Limited.  

OSL hopes to see continued growth if this is what the market demands. The firm disclosed that it offers end-to-end services for the STO transaction, acting as the bookrunner, placing agent, fiscal and paying agent, transfer agent, registrar, calculation agent, tokenisation technology partner and trading venue.

According to OSL, each digital token represents a USD10,000 unit of a Bitcoin-linked coupon-rate USD bond. The company develops the tokens using the Ethereum blockchain, has a three-month tenor and carries a fixed and a bonus coupon linked to Bitcoin performance.

In this way, investors are not only able to indirectly own digital assets pegged to traditional financial assets, but also buy the digital assets with U.S. dollars, Bitcoin and Ether, the digital token of the Ethereum blockchain.

OSL CEO Wayne Trench talked about the development: “The OSL STO transaction is a viable model for security token issuance and distribution of digital tokens by regulated operators. We designed the issuance to demonstrate the immense value and ease of distribution for a security token issued on a public blockchain. Through the STO, OSL reaffirms its position as a pioneer in the Hong Kong digital asset market. Blockchain-based digital securities represent the future of capital markets and financial products, and this is a key step in the adoption of this innovative and efficient technology.”

Through STOs (private security token offerings), OSL is playing a key central role in STO issuances and other digital asset transactions in the future. Licensed partner brokers and banks can emulate its innovative action to offer such products.

OSL Digital Securities holds a license for Type 7 (automated trading service) and Type 1 (dealing in securities) regulated activities related to digital assets from the Hong Kong Securities and Futures Commission (SFC). As a licensed broker, OSL is authorised to issue and distribute digital securities through security token offerings to professional investors.

Tokenisation Providing Opportunity for Investments

There have been increasing talks of security tokens in the cryptocurrency industry. These are digital tokens that represent tradeable securities and are regulated under securities laws. They are pegged to financial assets such as real estate, bonds, and stocks, to avoid the volatility witnessed in cryptocurrencies.

Startups with less financial experience and regulatory know-how definitely find difficulty introducing such digital assets and also hit roadblocks with regulators.

On 28th January this year, the Hong Kong Monetary Authority (HKMA) and the SFC issued a joint circular, which for the first time, allowed registered institutions and licensed firms to offer digital asset investment services through a partnership with SFC-licensed virtual asset trading platforms.

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tZERO to tokenize $18M of stock for the ‘Robinhood of real estate investing’

tZERO, an alternative trading system for security tokens, has announced a partnership with real estate crowdfunding company, NYCE Group, to tokenize $18 million worth of the firm’s shares.

NYCE’s stock will be tZERO’s first new listing since launching its ASPN pairing in August 2020, representing fractionalized ownership in a Colorado ski resort.

Announced June 30, tZERO will support secondary trade for NYCE’s tokenized common shares once the real estate company has completed its upcoming Regulation A+ offering, subject to regulatory approval.

NYCE’s shares will be tokenized using tZERO’s proprietary smart contract technology. Philip Michael, CEO and co-founder of NYCE, stated:

“Through our partnership with the leader in liquidity for digital securities, tZERO, we are excited to provide investors with liquidity optionality.”

The real estate firm was founded by Michael and FC Barcelona soccer player Martin Braithwaite, with media describing the platform as a “Robinhood of real estate investing.”

The NYCE app allows retail investors to own fractionalized shares in properties from its $260 million portfolio, describing its mission to create 100,000 high-net-worth millennial stakeholders of color by 2030.

NYCE finalized its $1 million Regulation Crowdfunding (Reg CF) offering in October 2020, setting a record for the fastest Reg CF offering to raise seven figures. The company formally launched its app in March.

Related: Security tokenization may be the next big use case for blockchain tech

Of the tokens on the exchange, volume for the ASPN token has consistently lagged behind tZERO’s native token TZROP and Overstock’s digital security OSTKO since the resort’s token was launched.

The security token sector has been on a wild ride in recent years, with monthly volume increasing from roughly by more than 110 times from less than $200,000 as of January 2020 to roughly $22 million during August.

However, monthly trade activity has since slumped more than 75% with less than $5 million in May.

According to Security Token Group’s latest report, TZROP was the most-traded security token for the month of May with nearly $2.7 million worth of trade. TZROP’s market cap is currently roughly $140 million, which would rank it as the 229th-largest crypto asset by capitalization, according to CoinGecko.