By Bill Taylor/Contributor
Just when you thought things couldn’t go any faster in the super fast-changing crypto world, another race has begun. This time it’s a race to become the first regulated exchange for security tokens (STOs). Recently the New York Stock Exchange announced it was exploring cryptocurrencies (remember, they just bought the Chicago Stock Exchange -maybe that’s the platform?) and several crypto exchanges such as Coinbase are looking to do the same, not to mention the European exchanges, some Asian exchanges and a myriad of smaller sovereign country exchanges. All of this rush to become a regulated exchange is happening in conjunction with the SEC strongly pursuing past token offerings (ICO’s) that may, MAY, be illegal.
But Overstock.com has already been working on being a regulated exchange for some time with its t0.com (tZero) platform and has just announced a collaboration with Box Digital Markets. tZero is already a SEC-regulated alternative trading system and Box operates the small Box Options Exchange which is already a registered National Securities Exchange. Great fit. Why is THIS a great fit? The tZero platform intends to “list and publicly trade security tokens for companies that issue, or convert existing stock to, security tokens.” In other words, the tokenization of stocks.
Security Token offerings (STOs) are the next progression of what ICOs (initial coin offerings) began. ICOs ushered in a new way to raise capital much more cheaply and without having to give up very much equity. They are essentially cheaper and faster than a traditional IPO to launch, and cut out the usual significant amount of equity demanded by venture capital firms. However, as you can imagine (and have heard), ICO abuses and fraud just plain got out of hand. Now the SEC has cracked down (it’s a good thing) and ICOs have a bad connotation in the financial community. As Overstock.com’s Patrick Byrne put it;
“The ICO craze of last year created a toxic waste dump of financial assets. To me, that world of ICOs is a Superfund site…What we’re developing is a mechanism so that there will be a legal way to go forward and not create any new toxic waste.”
Enter the new world of STOs, which are traded on regulated exchanges and are fully legally compliant. Say good-bye to traditional stocks, ETFs and commodities. Stay tuned, changes come quickly.
Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews