On July 15, 2019, the CEO of Overstock.com, Patrick Byrne issued a letter to shareholders. In the document, Byrne discusses the current state of Overstock’s blockchain ambitions and the company’s anticipated goals in the coming years. The document highlights the firm’s past achievements and explains how these actions correlate to Overstock’s bigger focus of pioneering the digital economy.
Byrne’s letter includes a brief overview of Overstock and its relationship to the blockchain technology sector. Notably, Overstock was the first major online retailer to accept cryptocurrency back in 2014. The letter also explains some of the motivations behind the decision, and how it spawned the development of Medici Ventures.
Medici Ventures Blockchain
Medici Ventures is an Overstock subsidiary that focuses on blockchain development. Overstock has spent a significant amount of capital developing the firm. Byrne takes a moment to acknowledge these investments, before explaining why he considered this the best course of actions.
Byrne cites the emergence of security tokens as the evolution of blockchain technology. He references several studies including – Billions to Trillion: Crypto Assets and the Inevitability of Digitization to highlight his point that tokenization of traditional financial assets is inevitable.
To support his conclusion, Byrne quotes some major industry bigwigs including the 2018 NASDAQ Chairman, Bob Greifeld. He quotes the Chairman as saying “100% of stocks and bonds can be tokenized, and in five years 100% of the stocks and bonds on Wall Street will be tokenized.”
Byrne explains that if Greifeld is correct, the tokenized economy will equal close to $500 trillion in the coming years. Additionally, exchanges that handle and offer tokenized securities will experience a huge surge in value. Byrne goes as far as to predict these exchanges value to reach around $1 trillion in the coming years.
At this point in the letter, Byrne takes a moment to reiterate that these are predictions and that nobody knows for sure exactly how long, or if ever, tokenization of the traditional markets will occur in full. After the brief disclaimer, the advantageous CEO takes a moment to discuss Overstock’s past accomplishments.
Overstock Leads the Pack
In April 2015, Overstock filed a self-registration on form s-3 with the SEC to register digital assets via blockchain. The company was among the first to do so. In December 2015, the SEC approved Overstock’s request to register security tokens.
In December 2016, Overstock issued the first SEC-registered digital security OSTKO. OSTKO was the first Blockchain-based Series-A preferred stock issued in the world. OSTKO began trading on the licensed exchange PRO Securities ATS.
Currently, OSTKO is only available to accredited investors with legacy accounts on the PRO Securities ATSD system. To be considered an accredited investor, you must show proof of $1 million in assets. Of course, most average investors lack this much capital. Therefore, many investors are unable to participate in trading these tokens in their current status.
In August 2019, resales will commence under rule 144. This means unaccredited investors will be able to participate in the market for the first time. Overstock plans to extend this strategy to other tokenized assets. In particular, the firm seeks to open the doors to global investments of the tZERO token. tZERO is Overstock’s native security token.
Byrne expressed his pleasure with the ability to allow more investor participation. Also, he touted deals with other registered digital asset exchanges including the Boston Security Token Exchange (BSTX). Notably, BSTX was the first regulated national security exchange in the US.
Byrne took a moment to explain Overstock’s competitive advantages in the sector. He cited the previously mentioned accomplishments. He also touched on the firm’s previous work with the SEC, and the fact that the tZERO token is SEC-registered.
Byrne explained the huge work and financial investments made to date, and why he considers these moves to be critical in the company’s efforts to position itself as a leader in the digital economy. Additionally, he cited protection from fraud and the ability to leverage efforts as the main reasons why security token ownership will expand.
Overstock has Grand Plans
tZERO, Medici Ventures, and the entire Overstock blockchain movement is impressive, and there is still much more planned for the near future. Byrne explained how these technologies are not only important to consumers but also revolutionary to governments.
The CEO explained how many countries lack the ability to incorporate traditional monitoring and enforcement methods utilized by developed countries. The infrastructure costs are just too high. Overstock plans to reduce these costs through the use of blockchain systems.
As an example of these grandiose plans, Byrne cited the firm’s agreement with Zambia. Here, Overstock plans to provide blockchain services to the nation, including land governance. Byrne takes a moment to describe why land governance is at the core of a society’s structure, and why a blockchain-based system is inevitable. The program goes under the name MLG, and it’s a real game-changer
Crypto Central Banking
Byrne’s blockchain ambitions don’t stop there. The firm has already begun development on a cryptocurrency central banking system. The crypto central bank is called Bitt. Bitt already has a partnership with the Eastern Caribbean Central Bank in Barbados. The firm also utilizes engineers from the Utah-based Medici team.
Overstock wants to provide more transparency and regulatory capabilities to countries suffering from poor money management, or economic collapse. In the paper, he cites many failed Middle Eastern countries, as well as Venezuela, as examples of governments unable to protect their currency from rapid inflation.
The Perfect Storm
Overstock wants to combine all of these platforms together, MLG, tZERO, and Bitt, to form a stack. This stack would allow governments to issue currencies, monitor monetary activity, and enforce regulations more effectively. The systems would reduce the costs associated with these tasks significantly.
Byrne Has Much More to Come
After laying out his company’s extraordinary plans, Byrne took a moment to discuss some other platforms that are in the works. Without naming the platform, he discussed the possibility of a peer-to-peer lending app in the future. Peer-to-peer lending apps are now more popular than ever. Blockchain technology makes these technologies more efficient and safer than previous versions.
Overstock is Aiming for the Stars
Byrne ends the letter with a brief discussion on the competition his firm currently faces in both the blockchain and retail market sectors. He explains that Overstock has a significant lead in these areas and that the company should be able to improve it’s positioning further in the coming months.
Poloniex Branches out from Circle as ‘Polo Digital Assets’
In a surprise move, Circle has announced that subsidiary, Poloniex, will be spreading its wings and ‘spinning-out’ on its own. This new company will be known as ‘Polo Digital Assets’.
Unfortunately, and unsurprising as Poloniex is U.S. based, the exchange’s customer base within the States will see future access to their services revoked. While this is unfortunate, it is a necessary stance being taken by such companies, due to the regulatory climate within the U.S., to date.
While not nation-wide, rival exchange, Bittrex, recently restricted access to their services for customers living in the state of New York. With the exiting of both of these exchanges from U.S. markets, there now remains a woefully thin selection of North American based exchanges for crypto enthusiasts to trade on.
While U.S. based customers may be losing access to services, this move actually represents an expansion of services for Poloniex, themselves, as they will now focus on global dominance.
Circle has indicated that an outside investment group has already earmarked $100M for infusion into services provided by Poloniex.
The team at Poloniex released a statement of their own, separate from Circle, elaborating on their future intentions. In an effort to bring an air of positivity and reassurance around the announcement, the team stated,
“Going forward, we have a multiyear plan to spend more than $100M to develop and expand Poloniex, and we are very excited to continue working with the amazing global community of Poloniex customers. The cryptocurrency revolution has just begun, and we’re in it for the long haul.”
There have been reports that the outside investment group, which is based out of Asia, is being led by TRON founder Justin Sun. This, however, has not been confirmed at this time, and is just conjecture.
While the driving factors (U.S. regulatory compliance) resulting in the development discussed here today are known issues, the move remained a surprise, due to the timing.
Poloniex was acquired by Circle in a high-profile move, a mere 18 months ago. This acquisition came in to the tune of $440M. While Circle did, indeed, help Poloniex expand services and rebuild a tarnished reputation, most expected a longer time frame of ownership for such an acquisition.
Despite the change of plans, Circle has not wavered in their belief of digital securities. Many believe that the initial intent of the purchase was to see Poloniex act as a secondary market, supporting digital securities distributed through the SeedInvest platform.
Change of Plans
While their approach to the sector may have changed, Circle is still eyeing digital securities as the future, and has indicated that their efforts, moving forward, will be more focused on SeedInvest.
Circle indicates that the following points of interest will also see a ramp up in development as the company looks to develop real-world use cases.
As one of the most successful crowdfunding platforms in the U.S., SeedInvest has the potential to provide Circle with an effective inroads to establishing themselves within digital securities sector.
The platform, which was acquired by Circle in early 2019, has helped a plethora of companies generate crucial funding, to date. Circle indicates that it is their goal to eliminate the divide between traditional finance and blockchain. By marrying the two, they hope to democratize investing, by opening new opportunities to investors of any ilk.
Upon making their announcement, a joint statement was released by Circle Cofounders, Jeremy Allaire and Sean Neville. This statement addressed the rationality behind this move, and how it will help Poloniex mature.
“In an effort to create a competitive internationally-focused cryptocurrency exchange, the Poloniex team and leadership are spinning out from Circle into a new independent international company, Polo Digital Assets, Ltd. Backed by an Asian investment group, the spin-out will bring significant resources and freedom to deliver the product features and marketing strategies needed to be competitive.”
The pair elaborated on their plans moving forward, and the role that SeedInvest will play in them.
“Earlier this year we completed the acquisition of SeedInvest, the largest equity crowdfunding platform in the United States, and have helped hundreds of companies raise hundreds of millions of dollars with internet-based securities offerings. Our plan with this business is to transform how companies raise capital, and open up investment opportunities to people everywhere. We have been working hard to introduce new services built on SeedInvest that allow for fundraising using tokens and digital assets, marrying traditional financial contracts and assets with crypto.”
Operating out of Delaware, Poloniex is a popular cryptocurrency exchange, which was founded in 2014.
CEO, Tristan D’Agosta, currently oversees company operations.
Circle is a Boston based company, which was founded in 2013. Above all, the team behind Circle is working towards developing a transparent and globally accessible financial system.
CEO, Jeremy Allaire, currently oversees company operations.
Archax to Streamline Post-Trade Activity through R3 Corda Platform Integration
With Archax looking to provide their future clientele with a comprehensive experience, they have recently announced a partnership with R3 Corda.
This partnership will see Archax benefit from services proffered by R3, as they bring the ability to support DLT based post-trade activities.
Archax has indicated that they will be integrating a private version of the R3 platform into their services. While this is being done in an effort to offer an all-in-one solution, it also makes this solution a more cost & time efficient one.
In their released announcement, representatives from each, Archax and R3, took the time to comment. The following is what each had to say regarding the partnership.
Graham Rodford, CEO of Archax, stated,
“Our existing systems and partnerships with firms like Aquis, provide the core functionality for our exchange. R3, with its Corda product, provides the final piece of the puzzle on which we can build a truly revolutionary post-trade solution. Although Archax is blockchain agnostic for digital security issuances, we needed an institutional-grade system for our own post-trade use. R3’s permissioned blockchain solution is already used by leading blue-chip organisations so fits the bill perfectly. This partnership will deliver the blockchain efficiency gains for financial markets that are so often talked about, and we believe will be the first of its kind…The current post-trade process in traditional financial markets is hugely inefficient, with many intermediaries involved. This partnership between R3 and Archax will enable us to revolutionise the current post-trade space, removing friction and streamlining activities to improve efficiency and reduce cost.”
Cathy Minter, CRO of R3, stated,
“Working alongside the world’s leading financial institutions, R3 made a conscious decision to leverage blockchain technology to solve real business problems in both complex and highly regulated markets. Representing assets as tokens on a blockchain platform is one of the most impactful applications of the technology and a key focus for R3, too. Archax, with its experienced team and base in London, is building one of the most credible venues for these tokens and will play a key role in driving institutional adoption. As such, our Corda Enterprise platform is ideally-suited for this project, and we look forward to working together to disrupt and revolutionise how financial markets operate.”
Speaking with Graham
We recently had the pleasure of completing an exclusive interview with Archax CEO, Graham Rodford. In this discussion we learn more about, not only Rodford himself, but future plans for the promising Archax.
Founded in 2018, Archax is a London, England based company. Above all, Archax is working to establish themselves as an authority within the digital securities sector. The company is soon approaching the launch date of their anticipated exchange for digital securities.
CEO, Graham Rodford, currently oversees company operations.
Operating out of New York, New York, R3 Corda is an ‘enterprise blockchain software firm’, which was launched in 2015. The company describes their platform as offering the ability to record, manage, and execute financial agreements in an efficient manner.
CEO, David E. Rutter, currently oversees company operations.
In Other News
With an expected launch date rapidly approaching, Archax has caught our attention on multiple occasions. As recently as 2 days ago, we were reporting on a new partnership with HighCastle. The following articles demonstrate a few of the more recent developments announced by Archax.
HighCastle Seeks Increased Liquidity through Archax
Partnering for Liquidity
Earlier today, Archax and HighCastle announced a newly established partnership. Between the two companies, they offer services entailing the trading of digital securities, blockchain based registrar, onboarding platforms, and more.
The pairing of companies indicate that this move was undertaken in an attempt to provide high levels of liquidity for digital securities issued through PrimeNet.
Upon announcing their partnership, representatives from each, HighCastle and Archax, took the time to comment. The following is what each had to say on the matter.
Philip Millar, Executive Director of HighCastle, stated,
“At HighCastle we provide companies and funds with a full technical and legal framework for compliant digital offering, issuance, distribution and transfers of securities on a distributed ledger and the opportunity to maintain a blockchain-based share register. By integrating with the Archax exchange, HighCastle will provide our issuers and their shareholders with the additional channel of trading and liquidity.”
Graham Rodford, CEO of Archax, stated,
“The tokenisation of all asset classes globally will not only facilitate bringing liquidity to currently illiquid and hard to trade assets, but ultimately will disrupt all traditional financial markets too. Blockchain brings huge benefits in terms of the improved efficiencies and the difference it will make to the post-trade process will be truly transformational. HighCastle, with its focus on the issuance, distribution and management of digital securities, is perfectly placed to bring the benefits of blockchain to SME firms and funds, and we look forward to working with them as this exciting tokenisation ecosystem gathers momentum.”
Speaking with Graham
We were recently fortunate to have had the opportunity to complete an exclusive interview with Archax CEO, Graham Rodford. In this conversation we learn about, not only Archax, but digital securities overall.
Founded in 2018, Archax maintains headquarters in London, England. The team at Archax has been ramping up operations as they prepare for an expected launch of their digital securities exchange in late 2019.
CEO, Graham Rodford, currently oversees company operations.
Founded in 2016, Highcastle maintains headquarters in London, England. In the time since their conception, HighCastle has developed a variety of specialized services, meant to facilitate digital securities.
CEO, Philip Millar, currently oversees company operations.
In Other News
With Archax being one of the more anticipated digital securities exchanges, it should come as no surprise that we have covered them various times here at securities.io. The following are a few articles taking a closer look at Archax, and a few of their other established partnerships.