All you need to know about the Formosa Financial merger with CEZEX and Katalyse
May 22, 2019
Formosa Financial is proud to announce the merger with CEZEX and Katalyse. Collectively we create an end-to-end solution for the emerging digital asset market, specifically the trend of tokenized securities from capital markets — more commonly referred to as security tokens. Here, we are going to answer your question about the merger.
What does this mean for clients of Katalyse.io, CEZEX, and Formosa Financial?
CEZEX aims to create a more structured market environment for listing and trading digital assets as well as support the continuing professionalization and development of the digital asset industry as it moves into new market sectors. It is, therefore, logical to combine the digital exchange with the treasury management platform developed by Formosa Financial, so issuers and other companies with digital assets can seamlessly manage their corporate accounts in close proximity to the exchange providing liquidity for their issued assets.
Collectively, we will be able to provide a complete solution to issuers of security tokens from tokenization, treasury, and trading services. The goal of this merger is to provide the full suite of services to issuers of security tokens from beginning to end.
We believe clients of CEZEX, Formosa Financial, and Katalyse will significantly benefit from a more integrated solution for creating and managing digital assets. This combination will enrich the global security token ecosystem and reduce friction to allow for more participants to enter the digital asset markets.
What does this mean for FMF holders?
The core utility for FMF tokens remains the same; access to industry-leading solutions for cryptoasset custody and brokerage activities. The merger has broadened the scope for the type of assets and functions supported by the FMF token. FMF will serve as the “platform token,” covering activities such as tokenization, trading, and treasury. The assets supported by FMF is now including traditional capital markets where these assets can be tokenized (digital assets), listed, and traded on the security token exchange, CEZEX. Holders of FMF will receive special discounts and offerings for all services in the merged platform offering, with more details to be released in the upcoming weeks.
Within this much larger ecosystem, we expect to generate consistent demand from clients as the scope of our service offerings grow and the need for high-quality infrastructure services within the security token space expands.
About CEZEX Digital Exchange
What is CEZEX?
CEZEX Digital Exchange comprises a unified platform for traders, brokers and issuers to list and trade a fully regulated and compliant market exchange. CEZEX are operating a regulated marketplace where companies and projects can list asset-backed tokens and investors can trade these security tokens with other investors in a secondary market where security and transparency are safeguarded by CEZEX.
For trading, CEZEX is offering 3 kinds of asset-types: (i) derivatives, (ii) currencies, and (iii) security tokens (an asset-backed digital token that represents the ownership of an asset). In essence, CEZEX is a next-generation exchange market for direct trading in digital assets.
Where is CEZEX based?
CEZEX has its headquarters based in Singapore and has operations in the Philippines, Taiwan, and Singapore.
Does CEZEX hold a license?
CEZEX operates a unified platform for traders, brokers, and issuers to list and trade on a fully regulated and compliant market exchange. CEZEX obtained a license and are authorized to operate a “Security Token and Asset-Backed Token Exchange” as issued by the Cagayan Economic Zone Authority (CEZA), the Philippine government controlled corporation tasked with managing and supervising the Cagayan semi-autonomous region. CEZA has set up a Self-Regulatory Organization (called ABACA) to oversee the governance of digital assets for the region.
Under the license, CEZEX is permitted to allow for trading of any asset class (securities, commodities, derivatives, currencies, metals, etc.). The activities are only permissible for off-shore activities wherein the buyer and seller are outside of the Philippines.
Who is behind the development of CEZEX?
The initiative for CEZEX is led by a consortium that has been successful in building and operating FinTech, capital markets and trading platforms such as Coinhako (crypto wallet & digital currency exchange platform), Katalyse (previously known as Fundyourselfnow, Asia’s leading crypto crowdfunding platform), Inbase Partners (digital assets asset management and advisory firm), PPDE (leading derivatives operator in Cambodia) and Formosa Financial (platform for treasury management of digital assets in Taiwan). The development of CEZEX is backed by the Cagayan Special Economic Zone (“CEZA”), the Philippine government-owned and controlled corporation tasked to manage and supervise the development of the CEZA and Freeport.
Can I become a member participant on CEZEX?
CEZEX hold strict requirements for its market participant members. Memberships are available to companies only; applications from individuals cannot be accepted. Applicants should be authorized (for regulated activities broker-dealer, investment advice, dealings with securities license or something similar) in their constituent jurisdictions and need to understand and comply with the CEZEX exchange rules.
CEZEX provides a regulated environment for its members to ensure that participants CEZEX operate under a compliant regulatory framework (KYC/AML/listing rules/trading rules). Together with its members (brokerage firms, sponsors, traders, investment firms, market makers), it aims to manage and run a world-class exchange operation.
What are security tokens?
A security token is a digital token that represents the ownership of an asset. These tokens can be linked to any type of investment, such as real estate, stocks or commodities (including metals). Compared to traditional securities, tokenized versions bring a number of benefits.
The main reason why securities tokens are expected to disrupt and revolutionize global capital markets is due to the extensive programmability of the tokens. Whereas stocks are essentially just paper representations of ownership in an asset that are locked away in a safe without any functionality, security tokens can, through the utilization of smart contracts, automatically engage in a number of functions such as corporate governance, proxy voting, and dividend payments by programming these directly into the token.
Furthermore, security tokens allow for improvements in market efficiencies as the smart contract enabled features of the tokens can guarantee asset ownership, secure trading, ensure regulatory compliance, provide greater liquidity (as it can break down large assets into smaller pieces), and much more. The hope is that by providing a marketplace for securities tokens with clear rules and a regulatory framework, there will finally be an opportunity to bring the blockchain industry and institutional investors together.
What are the benefits of security tokens?
When do you anticipate trading of security tokens will be available on the exchange?
The CEZEX team has dedicated a lot of effort and resources in developing a comprehensive ecosystem enabling an integrated solution for digitizing assets from tokenization (issuance), listing, treasury management, and trading. We have been testing in beta mode earlier this year to smoothen and optimize the workflow, and are now fully-ready to manage and operate the exchange for listing and trading.
CEZEX has a strong pipeline of deal flow from applicant companies that would like to be listed on the exchange. The first batch of security tokens has been planned to be listed by June this year.
What is the process for listing on CEZEX?
As a first step, the company that intends to issue a security token is required to appoint a CEZEX designated sponsor that will assist with the listing process and ensure the issuer meets compliance obligations. The sponsor is required to conduct due diligence and shall endorse the issuer’s security tokens to list on CEZEX. Following approval of KYC/AML, the underlying assets are pledged at the depository for safekeeping and verification. In most cases, this sponsor will be Formosa Financial as a result of their holding a Principal CEZA license which enables this activity.
Upon receipt, the issuer will then go to the tokenization platform to issue the smart contract for listing on the security token exchange. The smart contract is programmed to include the compliance variables / key terms of the offering (similar articles of a shareholder agreement) such as corporate governance, proxy voting, dividend payments, redemptions mechanisms, etc.
With the support of the sponsor, the issuer is required to prepare and publish an offering memorandum and specify the terms of the offering process. The issuer may be required to submit additional disclosures such as sponsor letter, comfort letter from an audit firm, legal opinion, etc. The sponsor will liaise with CEZEX and submit the application. Upon approval, the tokens can now be traded on the security token exchange.
The trading of security tokens will be managed by whitelists. The issuer has a whitelist (initial token holders), the exchange has a whitelist (investors that have passed KYC) along with the depository institution which aggregates the whitelist of the issuer and exchange while also managing its own. Tokens can only be authorized to be traded if the investor is on the whitelist and not on the exchange blacklist. A new person comes to buy the token must either open an account with the exchange and pass KYC or do KYC with the company directly or with the depository.
What are the criteria for security tokens to be listed on CEZEX?
In principle, all companies (public / privately owned, investment funds, etc.) that have raised capital through regulated asset-backed security token offerings are eligible to list on CEZEX, as long as the company meets the listing conditions. CEZEX will validate and accept applications based on approval of its customer due diligence requirements.
How long will the listing process take?
The listing process can take up to 1–2 months depending on the amount of work required to get the documentation done properly.
What are the ongoing obligations when listed on CEZEX?
Following admission to the exchange, companies are subject to a range of disciplines and requirements. These can be broadly divided between the legal and regulatory requirements, which are the continuing obligations that all quoted companies must meet; and market-driven disciplines and activities, which are not compulsory, but which are advisable and even necessary in order to make the most of your quotation and gain the maximum benefit from it.
Quoted companies must ensure that they keep the market informed, promote themselves to the investment community, and listen closely to what the market is saying.
Is CEZEX a new kind of ICO platform?
No, CEZEX is not an ICO platform nor a crowdfunding platform. The main difference is that crowdfunding platforms are less heavily regulated and typically do not offer a secondary market. This means that is impossible for investors to trade in securities after purchasing them, and prevents an early liquidation from the platform. In addition, any person or business could attract capital via a crowdfunding platform without any form of regulation.
Can any type of investor participate in the CEZEX exchange?
In general, any natural person or company can participate in the CEZEX exchange.
For the buying and selling of certain investment products (such as derivatives, and security tokens) that require a better understanding of financial markets, investors can give order through a qualified brokerage firm that is a member participant to the CEZEX exchange.
How do I start trading on the CEZEX exchange?
Following registration, you will receive an activation email. Your account needs to be validated following activation. CEZEX is required to identify, validate (AML/KYC process) and accepts investors, before creating an account of the CEZEX platform. We will ask for a copy of your passport or ID card. Once validated qualified investors, CEZEX will be able to open your account which you can use for trading / participate in fundraising.
Is there any charge with opening an account with CEZEX?
No opening an account is free of charge.
What are the opening hours of CEZEX?
Investors can trade 24/7 on CEZEX.
About Formosa Financial
What is Formosa Financial?
Formosa Financial develops institutional-grade treasury management services for digital asset holders (exchanges, investment funds, high net worth individuals) and blockchain innovators (security tokens companies and projects) which allows them to focus on their business while seamlessly managing their financial needs.
What services does Formosa Financial offer?
Formosa Financials is offering various treasury management services. After undergoing a know-your-business due diligence process and being authorized to access the platform, customers will receive deposit addresses for supported blockchains and account numbers for making deposits to start using the treasury management platform:
- Custody: clients will have access to institutional custodial solutions (digital asset custodial services, fiat custodial services, STO pre-placement escrow) for digital assets via Formosa’s partnership with one of the leading custodial providers such as BitGo.
- Brokerage: provide a single access point to multiple exchanges and OTC trading pools, minimizing the need to go through multiple KYC verifications to get best price execution
- Payment and cash settlement services: provide fiat deposit/withdrawal facility for client funds and convert into different digital assets through US banking partners.
Clients can access the integrated treasury management services through a single interface gateway and have access to a customizable suite of treasury management and security tools. Through single account access, Formosa Financial is eliminating issues of opening multiple accounts and providing multiple documents in KYC in different institutions and holding multiple passwords, making it easier for digital asset owners to focus on their core business.
By working implementing high standards in KYC/AML controls, Formosa Financial is able to seamlessly provide access to fiat through industry-leading US banks with its integrated custody and cash settlement solutions.
Formosa Financial has also partnered with BitGo to incorporate an extra layer of security as well as proper wallet management and accounting database system which works both for centralized and decentralized applications. Formosa Financial makes use of a 2-Factor Authentication to make sure only registered users have access to withdraw funds. To make transactions more secure, users are required to update withdrawal addresses to a whitelist when they register which reduces the chances of unauthorized account access
Where is Formosa Financial based?
The Formosa Financial team is based in Taipei.
Does Formosa Financial hold a license?
Formosa Financial has obtained a Principal license from CEZA which compliments the CEZEX license to operate an exchange. With the principal license, Formosa Financial is able to issue digital assets; including cryptocurrencies, asset-backed tokens (security tokens) and utility tokens. Additionally, the license enables Formosa to operate as an accredited wallet provider and custodian. This allows Formosa to perform critical activities in the industry, including the ability to serve as a Digital Asset Auditor and third-party custodian of digital assets.
In terms of the merger with CEZEX, this adds value in integrating key services needed for appropriate risk management controls with companies and projects who offer security tokens. In terms of Katalyse, the tokenization platform gains credibility through our license to create a regulated, audited, and compliant security token. As a complete solution, the merger creates the right market infrastructure needed to make the tokenization, treasury, and trading process for all types of digital assets as seamless as possible.