Challenges To Chinese Securities Law In Developing The Financing Model Of Security Token Offering And The Countermeasures Thereof

In the new digital economy times,the development and application of blockchain technology in the financial field has been accelerating.Developing Security token offering(STO)financing model will help establish a multi-level capital market,it provides a new way to alleviate the difficult problem of financing of SMEs,and help cultivate and develop blockchain technology and accelerate Internet financial innovation.Facing the complex and fierce international competition,China should actively embrace financial innovation and develop STO financing mode.STO financing model is undoubtedly a revolutionary innovation for the traditional securities market,and the development of STO financing model is bound to challenge China’s long-term semi-closed securities market.On the one hand,it has advantages of low cost,high efficiency,high transparency and high security.On the other hand,it also causes credit risk,market risk and so on.Due to many differences between these securities and traditional securities issuance,the securities legal system is inadequate in STO financing mode.Specifically,the development of STO financing mode will impact the concept of "securities" in China’s securities law.Because the security token is essentially a kind of security,the definition of "securities" in China’s securities law is too narrow.The development of STO financing model will also challenge the securities issuance system in China,and its characteristics of " Financial Disintermediation" also greatly weakened the participation of securities intermediaries.The STO financing model originated from "private finance" has a low investment threshold,but the high standard of China’s qualified investor system fails to achieve a balance between investor rights protection and participation right protection.In addition,in the face of STO financing platform,there are still huge loopholes in traditional securities legal rules about the identification of legal status and functions of these platform,and regulators are facing with the embarrassing situation that there are no statutes to apply.In order to address the challenges posed by STO financing model to traditional securities regulation,we need to study the legal measures taken by other countries to seek regulatory experience.The United States of America and Singapore have achieved good results in the regulatory response to STO financing model.In order to ensure the orderly development of STO financing model,the securities and exchange commission incorporated STO into the adjustment scope of securities law through Howey test to allow the issuer to issue securities tokens according to the corresponding exemption rules.The monetary authority of Singapore has issued a digital currency guide to clarify the legal nature and application of STO.In order to control the potential risks in the STO financing model,both the United States of America and Singapore have used the STO platform as a key point to control the overall risks by implementing a platform licensing management system to restrain their activities.At the same time,these countries also established the corresponding investor protection mechanism based on the risk characteristics of STO financing model.The development of STO financing mode in China relies on a perfect securities legal system to provide institutional guarantee for it.The legal system of STO financing mode should be constructed in accordance with the actual situation of China’s legal system and the development of the securities market.The design of specific rules should adhere to the principle of encouraging innovation and risk prevention.First of all,perfecting the existing Securities Law,revising the concept of securities,STO should be brought into the jurisdiction of the securities law in order to clarify its legal status.Then,establishing the exemption system for small issuance,and adjusting the role mechanism of intermediaries to release STO financing mode’s innovative value.And,it is necessary to formulate specific regulatory rules,mainly including the classified quota system for investors and the platform regulatory system in order to prevent and control the risks that STO financing mode may bring.