LEVIAS: Security Token Offerings for Future Economies

LEVIAS' J-STO platform is Japan's first information and communication management system that uses security tokens to connect the issuers and investors of securities and designs new economic value by liquidating assets. The company's platform enables users to manage information on various contracts and assets, which were previously managed in written form and other analog ways, to be managed in a highly reliable digital format by utilizing blockchain and AI technology. Users will be able to perform a series of agreements and acceptance procedures accompanying each contract by a program (smart contract) defined under the framework of the current Japanese law. Thus, reducing the number of human errors by speeding up procedures related to asset transfers.

Asset Holders will receive security tokens in the form of electronic vouchers recorded on a private blockchain in proportion to the equity interest as proof of contractual status. The Security Tokens incorporate evidence information such as investment contracts into an information processing program (smart contracts) relating to the transfer of contractual status. A security token holder will be able to view the information about the owned assets at any time on the user-dedicated interface on the J-STO platform. Users can also apply for bilateral transactions related to the transfer of contractual status, perform a series of agreements/acceptance procedures accompanying various contracts, and automatically modify the name list of multiple assets. The information on the transfer of these assets will be recorded by blockchain traceability and stored as trail information for AML. In addition, by applying AI technology, various autonomous programs are monitored continuously for regular and proper operation. Suspicious transactions are detected and met with a countermeasure program to promote work-flow efficiency. The final element of the platform is the creation of a new concept of liquidity. Sustainable development of security tokens in DLT will rely on a robust ecosystem coupled with a well-defined regulatory framework and compliance. LEVIAS brings a new approach and innovative mindset for new entrants and expertise of the existing market infrastructure operators. To reduce the complexity of procedures and cost performance in transferring assets, J-STO's platform aims to create a new environment to connect users through the Internet and apply for transactions according to compliance procedures. This new approach will probably disrupt current stakeholder roles and also prompt the development of new ones.

Despite the fact that STOs will provide a significant business opportunity and financial innovation to financial markets, investors and issuers, the structure remains at an early stage. Regulators are yet to provide comprehensive rules and requirements to cover the STO related activities, such as enabling an appropriate linkage between virtual assets and any underlying assets. Furthermore, given that Security Token trading activity can be borderless, global regulators need to cooperate in a consistent approach and method in regulating and supervising STOs.

Established in 2018, LEVIAS aims for an IPO by 2024, contributing significant growth to the Japanese economy by taking advantage of the strengths of venture companies, such as good “footwork” and a sense of speed, to solve various problems including the issues mentioned above. "LEVIAS will focus on building new data governance one by one regarding the connection between Japan and other countries by building a de-facto standard environment and acting as an international hub," concludes Tanaka.