Six Major Japanese Brokerages Form Security Token Offering Association

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.

Japanese banknotes image via Shutterstock