Liquefy’s co-founder and COO, Oscar Yeung, usually operates out of Hong Kong, but currently, he is in the Middle East helping to set up Liquefy’s new Dubai office. Only last month the company announced its partnership with The Private Office of Sheikh Saeed Bin Ahmed Al Maktoum and SEED Group.
The partnership aims ‘to propel Dubai as a global leader in FinTech and catalyze the growth of the security token industry by working with Liquefy.’ No doubt that for Asian countries like Hong Kong and parts of the Emirates like Abu Dhabi and Dubai, tokenization is placed high on the agenda. We had a talk with Oscar Yeung about his view on the Asian and Middle Eastern frontrunners.
Michael Juul Rugaard (MJR): I am curious to hear your opinion on what is happening in the Middle East and Asia. We are receiving more and more signals indicating that some of the global frontrunners in the security token space are parts of the Emirates and Asia, especially Hong Kong and Singapore. What is your analysis?
Oscar Yeung (OY): If we start with the UAE region, I think the Abu Dhabi Global Market is very much ahead of the game in terms of opening up the STO space. They are trying to target this industry very quickly and trying to get different players to work together. The ADGM balances an open attitude to working with security token projects with a keen concern towards maintaining regulatory safeguards for investors. You want to be innovative, but you also want proper compliance. I think they’re striking the right balance between protecting investors, but also opening up the market to new developments.
We’re opening a new office here in Dubai supported by the royal family in Dubai. It’s very exciting, and there are a lot of things going on around here. Our joint venture with the royal family has given us a leg up in the government space. We can speak to the government officials and to the regulators very directly to explain our technology. They give us their feedback and tell us what they want to achieve, and we work together on achieving those goals.
MJR: How about Hong Kong where you have your headquarters and the region around Hong Kong. Are things developing equally fast in that region compared to the Emirates?
OY: Yes, I think infrastructure is being developed right now in the Hong Kong region. Also, I believe that this industry will see exponential growth once the right legal framework is in place. There is a huge volume of illiquid assets in Asia that have no access to the public market. These new technological developments will open up these assets for liquidity and funding. Hong Kong as a financial centre has already quietly put a great deal of effort into researching this industry and making sure that it’s treated fairly – and, of course, these things take some time.
MJR: Already in March the Securities and Futures Commission (SFC) of Hong Kong published their rather clear opinion on security tokens saying that: “In Hong Kong, Security Tokens are likely to be ‘securities’ under the Securities and Futures Ordinance (SFO) and so subject to the securities laws of Hong Kong.”I assume this clear message was well received in the industry?
OY: Yes, that’s correct. They defined it as a security and a complex product at that point in time. It is clearly distinguished from cryptocurrencies, which I think is very good for the industry.
For security tokens, we look to laws on securities to determine what it should be and what it should do. When you’re distributing digital securities, you know that you need a broker/dealer license. For the industry in general, it is important to know precisely what the regulatory authorities are looking at. Because the last thing you want is ambiguity, and having to guess how regulators are going to regulate things, and then suddenly coming up against unexpected regulatory developments.
MJR: Sure, the market needs clear guidelines. If you look into the crystal ball, what do you see two-three years ahead from now for the Hong Kong security token space?
OY: Some of the keywords, I think, will be increased liquidity and much further development of exchanges. Right now, we see limited liquidity, and the security token exchanges have troubles taking off. However, it’s a process.
The three key components are issuance, distribution, and exchange. Currently, there’s not enough infrastructure in place leading to the point of significant volumes for exchange, but in two or three years from now, there will be a market with strict frameworks and guidelines on what should be listed, how it should be listed, and with precise reporting, listing requirements and so on.
When more trust is built up in the market, we’ll start seeing more liquidity in the exchanges. That would be good for the industry in general because once you have liquidity, people view the product as being more mature, and more private companies with illiquid assets will look for opportunities in tokenization as a way to gain value.