Security Token News
DTCC Releases Security Token Principles Paper
Crypto advocates interests were sparked this week after the Depository Trust & Clearing Corporation (DTCC) released a whitepaper describing fair security token business practices. The whitepaper primarily focuses on post-trade concerns. The release of this document highlights the growing interests of investors in tokenized securities.
The paper lays out a concise market infrastructure in which security tokens must operate within the same rules as traditional securities. While security tokens are subject to the same regulations up to the initial trade, post-trade regulations are lax and in many instances, non-existent. The DTCC wants all players in the arena to operate in the same manner.
DTCC via Bizjournals
The DTCC proposes an identifiable governance structure to institute these regulations. The paper lays out seven areas of concern which the firm believes are critical in protecting investors and facilitating market growth.
- Demonstrable Legal Basis – All distributed ledger platforms must have clear and concise guidelines surrounding any financial products offered.
- Identifiable Governance Structure – Platforms offering security tokens must have appropriate governance support systems in place. These systems provide risk management.
- Identifiable Procedures and Systems to Ensure Settlement Finality – All security tokens are required to provide clear settlement of all transactions.
- Security Token Issuance, Custody, and Asset Servicing – Security tokens should have safety control measures in place to mitigate the chance of loss. These measures should include internal controls and robust accounting practices.
- Resilience – All security tokens must prove that they can operate securely in the marketplace.
- Required Record Keeping – All security token platforms must be able to secure their client’s information. Additionally, this information needs to be available to regulators upon request.
DTCC
The DTCC is a US-based firm that provides financial markets with clearing and settlement services. Originally, the DTCC’s task involved updating the aging securities token processes in use during the 1970s and prior. During these times brokers hand to physically exchange certificates. As you could imagine the process was expensive and time-consuming. Today, the DTCC performs securities exchanges on behalf of investors. The firm is a central securities depositary that provides custodial services to the global financial markets.
Market Power
As the central securities depository, the company holds incredible sway in the market. To give you an idea of just how large the firm is, in 2011 DTCC settled $1.7 quadrillion in transactions in the US alone. The company works with regulators from across the globe to help quell security concerns in the market.
Today, the DTCC works with lawmakers, regulators, and key stakeholders in the US, Asia, Australia, and Europe. The company is an advocate for sound public policy. In the past, the DTCC collaborated on both national and local financial regulations.
DTCC and Global Regulations
You can expect that these latest recommendations influence the future regulations of many nations moving forward. Consequently, these guidelines could create momentum for global security token regulations in the near future. For now, many governments are still clueless on how to handle the digitization of the economy.
Acquisition
For companies working on a global scale, the shortest path to their goals is often through acquisitions of already established entities. An example of this was made recently when Smartlands announced that they had acquired a majority share of Shojin Financial Services.
By completing this move, Smartland now inherits the abilities of SFS – such as their investment licence. This licence was awarded to SFS by the Financial Conduct Authority in 2017. By receiving this licence, SFS is able to legally function as a global crowdfunding platform. The process of receiving this licence is a lengthy and difficult one – a process bypassed by Smartland through the acquisition.
With this move, there is not much left holding Smartland back from taking the sector by storm. The company even recently announced the listing of their platform utility token on industry leading crypto exchange, Bittrex. Everything is turning up Smartland.
STO
Beyond news of this acquisition, Smartland also indicated that the first security token offering to be hosted on their platform has now gone live. This event will see the distribution of digital securities backed by UK based real estate. No doubt, the choice to base the first platform STO upon a real-estate backed asset is due to extensive experience in property investment by SFS.
The sale has a funding target of £1 million, with 30% equity to be distributed among qualified investors.
Commentary
In their announcement, multiple representatives from Smartlands took the time to elaborate on these developments.
Arnoldas Nauseda, CEO of Smartlands, stated,
“The fact that SFS possesses the type of license necessary for the Smartlands business model to flourish is not the only reason for the acquisition…We are proud to share SFS’s values and vision for the development of financial markets around the world. The firm also has a substantial pool of classic investors that the SFS team has been developing since 2017. Now, thanks to the Smartlands proprietary technology, these private investors have the opportunity to invest in the digital ownership of real assets secured on one of the most powerful and fast blockchains in the world ‒ Stellar network.”
Viktor Krekotin, Strategy Adviser of Smartlands, stated,
“The partnership with SFS is the last brick in the construction of the Smartlands Platform…This makes Smartlands one of the first fully regulated platforms for the issuance of security tokens. And Stellar will do what it does best: lightning fast, secure transactions at negligible costs to all involved, which makes Stellar the best blockchain for all operations with security tokens.”
Smartlands
Smartlands is a London based company that was founded in 2017. Above all, Smartlands functions as a tokenization platform, catering to a global client base.
Operations at Smartland are overseen by CEO, Arnoldas Nauseda.
Shojin Financial Services
Shojin is a UK based company that was founded in 2009. Above all, Shojin acts as an investment firm specializing in real-estate.
Company operations are overseen by cofounders Jatin Ondhia and Sandeep Puri.
In Other News
An emerging trend, as of late, is the increasing adoption being seen of the Stellar blockchain within the digital securities sector. Due to the structuring of this blockchain, it is proving to be highly adept at meeting the needs of the industry. Check out the article below for another example of a company recently adopting Stellar.
VMC – Connecting the Dots of Urban Mobility
Onboarding Identification
In their experience dealing with security token offerings, KABN has noted the need for next-gen identification services. Through the creation, issuance, and management of digital securities, they are able to ensure that tokens remain compliant with regulations. The initial onboarding process, which ensures only appropriate investors gain access to these STOs, is lacking in sophistication.
This recognition led AmaZix to seek out KABN for their patent-pending identification services dubbed ‘KABN ID’. This pairing of companies announced their strategic partnership today.
While KABN ID is what drew AmaZix to their new partner, they have indicated that they intend to make use of the full suite of KABN services. This includes opening new avenues for market access through KABN’s ability to facilitate crypto-fiat transfers.
Commentary
In their announcement, the CEOs of both KABN and AmaZix took the time to elaborate on this partnership.
Ben Kessler, CEO of KABN, stated,
“The overwhelming evidence justifies the need for closer scrutiny of processes and regulatory frameworks in token offerings, with the securitization of digital assets believed by many to be the natural progression for the space. It is a direction that AmaZix believes in and is working diligently towards, as demonstrated by their specialized advisory services and their partnership track record. We share their excitement and optimism for the industry’s future and look forward to collaborating.”
Jonas Karlberg, CEO of AmaZix, stated,
“Programmable regulatory compliance is a built-in feature with digital securities, ensuring the necessary KYC and AML processes are satisfied. But if STOs are to be the way forward, we have to analyze and consider the practical aspects of identity management on the blockchain, particularly with the growing debate surrounding privacy and the protection of personal data in the era of GDPR…And this is where we believe KABN’s solutions for token offering verification are technically appropriate for securing accreditation and will allow for responsible and compliant KYC processes. In addition, its neo financial services like its branded Visa prepaid card and banking wallet will give users an additional aspect that bridges the world of traditional and alternative finance, allowing them to use and spend crypto with more ease.”
AmaZix
AmaZix is a Hong Kong based company that was established in 2017. Above all, AmaZix functions as a consultation firm, focusing on the burgeoning digital securities sector. In their short time within the industry, they have been wildly successful – helping to raise over $1.3 billion for over 100 companies.
KABN
KABN is a Vancouver based company that was founded in 2017. Under the guidance of CEO, Ben Kessler, KABN has gone on to develop a suite of services aimed towards the digital securities sector. These range from their flagship identification service, to a crypto based debit card, and loyalty program.
In Other News
Both KABN and AmaZix have been busy establishing themselves in this nascent industry. Throughout their steps towards establishing themselves, we have detailed them various times here at securities.io. Check out the articles below to learn a little bit more about what these two companies have accomplished as of late.
Top STO Marketing Agencies to Watch in 2019
With an Eye on Digital Securities, AmaZix and Chainstarter have partnered
Digital Securities Consortium formed Between Industry Participants
KABN plans for Security Token Offering Hosted by Tokenise
Teaming up
Archax is ironing out all the details prior to the upcoming launch of their digital securities exchange. Part of this process is establishing partnerships with issuance platforms. In doing so, Archax will ensure that their own platform will have no shortage of token listings.
With this in mind, today, the duo of Tokeny and Archax announced a strategic partnership. This relationship will see digital securities issued via the Tokeny platform, through the use of their TREX framework, listed for trading on the Archax exchange.
This development creates a comprehensive suite of services for investors, and will help the industry deliver the much sought after liquidity within these assets.
Commentary
In their press release, the CEOs of both Tokeny and Archax, took the time to comment on the partnership discussed here today.
Graham Rodford, CEO of Archax, stated,
“We are building a regulated, institutional market – based in London – for institutions to trade in credible, digital securities globally. As such we want to partner with leading firms like Tokeny, who are a key part of this emerging ecosystem, and tokenising assets that can then be listed and traded on our exchange. The tokenisation of real-world assets using blockchain technology will not only unlock liquidity and create secondary markets for assets that are currently hard to trade, but also has the potential to disrupt all traditional financial markets too.”
Luc Falempin, CEO of Tokeny, stated,
“We know how strong Archax’s team is and they share the same belief that blockchain will transform capital markets. For blockchain to become the preferred infrastructure for this industry it’s imperative for there to be seamless transferability between the key actors in the market. By agreeing this partnership, we are able to offer the end-to-end compliant issuance of their security and Archax will provide the customer with the all-important access to the secondary market.”
Tokeny
Tokeny was founded in 2017, and is headquartered out of Luxembourg. Above all, Tokeny functions as a FinTech company. Over the past year, the team has set their sights on developing a comprehensive platform, tailored towards the digital securities sector. Under the watch of CEO, Luc Falempin, Tokeny has managed to establish various strategic partnerships, along with the release of the ‘TREX’ framework.
Archax
Graham Rodford founded Archax in 2018, and currently acts as the CEO of this young company. Archax maintains headquarters in London, England. Here, the company is actively developing a next-gen exchange for digital securities – which is anticipated to launch in the latter half of 2019.
In Other News
Both Tokeny and Archax have found themselves in our news feed various times over the past year. Whether establishing strategic partnerships, or announcing future STOs on their platforms, this pair of companies has been active. Below are a few articles detailing past developments of each.
Archax Gears up for Launch with Quod Financial
Archax – A Bridge to the Digital Economy
VR Bank to Issue Security Token with the help of Tokeny and Lition
Tokeny releases TREX – The First Public Framework for Security Token Offerings