The NEO Project’s “NEO Global Development” (NGD) group announced last week that it had formed a consortium to explore and understand the growing digital securities sector. The alliance, dubbed the Digital Asset Alliance (DAA), will endeavor to articulate and document the nuances of security laws as they apply to asset tokenization across different jurisdictions and assets classes.
The DAA opened its new Medium.com blog with this statement:”Digital Asset Alliance is a NEO backed initiative discussing security token related issues. We aim at building an open-source platform for security token life-cycle service providers, and developing best practices for the growth of tokenized networks.”
Helping to foster development and community
The Digital Asset Alliance aims to cultivate consensus, thus enabling NEO blockchain developers, as well as the global blockchain development community at large, to create a legally compliant security token standard. NEO’s NEP-5 standard can already be applied to security tokens, though it is up to the issuer to implement regulatory criteria at the smart contract level.
NGD global business development manager, Tamar Salant, said, “We will be collecting insights and then presenting them to the community and saying, you know, ‘These are the top 10 highest priorities – How do we translate this into code? How do we make sure this is in every smart contract?’ Because we know this is a standard that is very much needed. And I think when we’re looking at securities and digital assets, we’re touching on a few different fields.”
Onboarding industry players
The DAA will bring together a diverse group of parties drawn from what Salant calls the “supply chain of security tokens”: “Our virtual round table is a gathering of people from all across the globe, whether its issuance platforms or projects, or law firms, or liquidity providers, or AML/KYC providers – we’re getting a sense of what everyone is looking at.”
The blog introduced some of the first security token industry players to join the DAA:
- Better Alternatives, an Israel-based boutique blockchain advisory firm working with two STO projects hoping to launch in the U.S. in 2020.
- DLx Law, a New York City-based capital markets law firm pivoting to focus on the security token space.
- Globacap, a London-based STO sandbox regulated under the UK Financial Conduct Authority, going live with it first two STO launches in March.
- Hashgard, a Shanghai-based STO services provider developing its own security token standards.
- Liquefy, a Hong Kong-based STO platform planning to launch its first STO sometime in 2019.
- Republic, a New York City-based crowdfunding platform with a mission to enable retail investors to invest in seed-stage startups.
- Vertalo, an Austin Texas-based security token investor matching, compliance, and cap table solutions provider.
A global blockchain securities compliance hub
The mission of NEO’s existing “Global Blockchain Compliance Hub” repository will be expanded to complement DAA’s mission. Tamar Salant explained, “We’re starting to create specific categories in regards to STOs. So, not just about using blockchain technology or tokenizing assets, but really looking at the existing securities laws. So many regulators out there are issuing sandboxes, and new regulations, and new ‘simple English,’ as the SEC put it, in terms of a kind of framework. So, what we want to do is create a subcategory or just a very specific category within the Blockchain Compliance hub, specifically talking about STOs and digital assets. If there are any community members out there who have a specific interest in securities laws, we’re happy for them to submit.”
CoinList Founder Andy Bromberg Discusses Security Token Trends
The security token sector continues to be a hot button issue amongst the crypto community. This month, CoinList founder Andy Bromberg took some time to discuss the importance of these tokens, and how the coming months might play out. Unexpectedly, Bromberg had mixed feelings on the market’s trajectory.
In a recent interview, Bromberg pointed out some of the major issues facing the security token sector. He believes that the lack of clear regulations is the main factor deterring large scale adoption. Businesses are still unsure of what to think of this new crowdfunding strategy. The lack of transparency from regulators leaves many potential blockchain investors with unanswered questions.
Recognizing the need for more clarity in the space, the SEC issued multiple statements this year. These posts are an attempt by the SEC to help business owners understand the classifications of each type of token, and what regulations it falls under. Most recently, the SEC released a full guidance that covers each token class in detail.
STO Regulations Evolve
When STOs first emerged, many businesses saw these tokens as a cheaper and quicker alternative to traditional securities. At that time, the market lacked any regulatory structure. Businesses were able to issue tokens at will.
Nowadays this is no longer the case. The SEC recently stepped into the space in a major way. As a result, numerous businesses faced backlash for issuing securities illegally. Consequently, the STO market slowed until recently.
It Takes Time
When asked about the markets adoption rate, Bromberg was quick to let people know there is still a lot of time before STOs make it to the mainstream. The savvy crypto advocate noted that it could be years still until STOs gain enough traction to become a major crowdfunding strategy.
CoinList entered the market in 2017 with the goal of providing financial services to next-gen tech firms. The company has headquarters in New York and offices in San Francisco. Notably, the firm has fewer than 50 employees according to Crunchbase.
CoinList offers clients advisory services regarding blockchain-based investment strategies. As the President of CoinList, Bromberg is uniquely positioned to understand the sector’s demands. His company hears the concerns of both investors and service providers. Discussing the issues, Bromberg described how there is little incentive for companies to make the shift to the crypto ecosystem at this time.
Bromberg feels that in order for companies to have confidence in these new systems, there needs to be a clear legal framework that doesn’t detract from the advantages of blockchain technology. Basically, legislators need to fully understand the advantages of blockchain technology in order to structure regulations that enable the tech to function at peak performance levels.
CoinList STOs – A Bumpy Road Ahead
The overall tone of Bromberg is one of a man who fully understands the complicated scenarios that play out in the cryptospace. His ability to point out these shortcomings is sure to help CoinList remain a dominant player in the future.
Polymath Partners with QRC Group- Eyes Asian Markets
Asian companies looking to host an STO in the future just got a powerful alley. The token issuance platform Polymath announced a strategic partnership with one of Asia’s most successful STO consulting firms – the QRC Group. The partnership strengthens Polymath’s presence in the region. Also, it provides future STOs with the added guidance needed to make their crowdfunding campaigns a success.
News of the strategic partnership first broke via a Polymath blog post. In the post, the firm discusses Polymath’s goal to make token issuance as easy as possible. Notably, providing companies access to valuable third-parties is an integral part of Polymath’s all-inclusive strategy.
The QRC Group has an excellent reputation as an established STO advisory in the Asian marketplace. This Hong Kong-based firm provides companies with a plethora of STO-related services such as turnkey issuance. Additionally, QRC provides end-to-end solutions for STOs, including access to regulated secondary market trading.
Speaking on the developments, the CEO of the QRC Group, Shoga Ishida described the partnership as an “important milestone” for his firm. Ishida pointed out Polymath’s ideal position in the market. He then explained how QRC plans to help businesses seeking more guidance. According to the post, QRC will offer consultation in:
- Token issuance
- Technical infrastructure
Currently, QRC hosts a variety of blockchain-related programs. These run the full scope of the sector ranging from production and investment services, all the way to identity verification platforms. Additionally, the company has a native multi-currency STO wallet capable of storing over a thousand different tokens in the works.
Notably, QRC continues to push for international STO standards for the Asian and Southeast Asian markets. Asia plays a huge role in the crypto market. QRC believes that standards are needed in order for the STO market to reach its full potential in the region. Importantly, businesses need this regulatory framework in place before considering STOs to be an attractive alternative to the status quo.
The QRC Group currently works with multiple universities including Taiwan Tech and the University of Malaya. These programs study the effects of blockchain technology, and how it relates to the digitization of the global markets.
Polymath on QRC Group Services
Polymath’s Head of Tokenization, Graeme Moore also took a moment to describe why the QRC Group was the perfect addition to the Polymath ecosystem. He explained why connecting high-quality service providers with valuable business resources, is critical for the developing STO space.
Polymath continues to expand its network. The firm made headlines numerous times this year including in June when it partnered with Ethereum co-founder, Charles Hoskinson on the Polymesh project. Polymesh is a separate blockchain designed specifically for compliant tokens.
Polymath – STO Pioneers
Polymath’s expanding network is just one example of how STO providers plan to bridge the knowledge gap between businesses interested in hosting STOs, and providers of these services. The addition of the QRC Group provides the network with a host of valuable resources. You can expect to see these services play a major role in Polymath’s future token issuances.
BaFin Approves Germany based STO Platform by Black Manta Capital
In a process that took roughly 9 months, Luxembourg based, Black Manta Capital, was awarded licensure to operate an STO platform within Germany. This licensure was provided by regulatory body, BaFin.
This development moves the company one step toward their self-described mission of setting “a global standard for Security Token Offerings (STO).”
In their release, the company hinted towards a launch date, stating,
“The operative start of the investment platform with the first Token Offerings is planned for early Q4/2019.”
The approval received allows for Black Manta Capital to offer clients services surrounding security token offerings. Black Manta Capital has indicated that they intend for this platform to function as a comprehensive offering – meaning that they will provide clients all the necessary services from start to finish, through the tokenization process.
The act of tokenization involves selling, creating, and distributing digital securities which represent ownership of a variety of assets. These assets may range from cars, to art, to equity within a company, and anything in between. As these digital assets are securities, their creation and distribution is only possible when adhering to laws enforced by typical regulatory bodies, such as BaFin.
The STO platform to be offered by Black Manta Capital is expected to face stiff competition, as Europe is quickly becoming a hot bed for companies with similar ambitions. The following are a few of those expected to fit this role.
Upon making their announcement, Managing Partner of Black Manta Capital, Christian Platzer, took the time to comment. The following is what he had to say on the matter.
“Tokenization in the core financial field of securities will – for sure – bring paradigmatic change to the global financial markets.” – “While Black Manta Capital Partners want to be ‘boutique’ in its beginnings and run ‘handpicked’ STOs only, our strategy is global from day one: the first step is to link Europe and Asia on one blockchain-based investment platform. Therefore we look already today into Singapore.”
Black Manta Capital
Black Manta Capital is a young company which specializes in tokenization services. Operating out of Luxembourg since 2018, the company has plans for eventual expansion across various continents.
Managing Partners, Christian Platzer and Alexander Rapatz, currently oversee company operations.
BaFin is a leading financial supervising authority across Europe. With over 2,600 employees, this regulatory body oversees a variety of industries ranging from finance, to banking, insurance, and more.
The organization has been operational since being founded in 2002.
In Other News
Today’s announcement is not the first time that BaFin has provided licencing to outfits partaking in the digital securities sector. The following articles demonstrate a pair of other companies that have also been successful in this respect.