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.
DX.Exchange Goes Bankrupt – CX Technologies Ltd
Additionally, a host of suppliers have taken suit against the company. These suits run the gambit from unpaid bills to the alleged fraud. The well-known cybersecurity firm, White Hat Ltd is one of the company’s claiming losses due to DX.Exchange actions. Another lawsuit lists Bee2See Dotan B.S. Solutions. This is the firm that handled DX.Exchange targeted marketing. Even the company supplying the servers never got paid – Malam Team.
Writing on the Wall – DX.Exchange
Employees and suppliers knew to take action earlier in the month after the firm closed its doors unexpectedly. At the time, DX.Exchange owner Pinhas Patarkazishvili cited the rising costs and dwindled profits the exchange had left. He told employees that he was searching for a merger or acquisition and if that he was unsuccessful, the company would permanently cease operations.
Security Tokens on the DX.Exchange
Will Employees and Affiliates Get Paid?
VNX Exchange Launches, Calling Luxembourg Home
While there are many hurdles yet to be cleared on the way to the mainstream adoption of digital securities, there is one that remains obvious. This would be a lack of marketplace solutions within the sector.
Looking to fill this void in the sector is VNX exchange. The Luxembourg based company has just announced the launch of their digital assets issuance platform, which will work to facilitate the tokenization and sale of assets. VNX indicates that the potential for a secondary market launch will be evaluated in time.
In an event held to mark the launch of the platform, the company even drew praise from the Luxembourg Minister of Finance, Pierre Gramegna. He stated,
“VNX is one of the success stories of Luxembourg House of Financial Technology, the LHoFT”
A Place to call Home
For those that follow the digital securities sector, a geographical trend may have been noted. With forward thinking regulations, and industry clarity, Luxembourg has begun to establish themselves as a nation open to blockchain based endeavours. This has resulted in more than just VNX calling the European nation home. The following companies are just a couple of examples of this.
While the VNX launch is a positive development for the sector, they are not the first to the table, and will not be the last. The following companies stand to be a two of the major competitors in the same space in which VNX is looking to carve out a place.
Wasting no time in the launch of their services, VNX is providing investors with access to an STO straight out of the gate.
This event will see Korean based, Streami, issue €3 million worth of digital securities. The company itself is solution provider within the world of blockchain through services ranging from a cryptocurrency exchange, to custody, and fiat gateways.
The event garnered commentary from representatives of each, VNX and Streami.
Alexander Tkachenko, CEO of VNX Exchange, stated,
“Streami offering demonstrates the real use case of asset backed tokens to finance VC investments.”
Junhaeng Lee, CEO of Streami, stated,
“I strongly believe in the development of the assets-backed digital financial instruments. VNX offering shows how fundraising for VC industry may evolve and by extension implications to the financial industry. I am very excited and proud that Streami is the first offering presented at VNX platform.”
To learn more about the structuring of these digital securities, make sure to peruse the Streami investor deck HERE.
While first conceived in 2017, VNX exchange was founded in 2018. The company operates within Luxembourg, and hopes to transform FinTech through their platform.
CEO, Alexander Tkachenko, currently oversees company operations.
Tokai Tokyo Financial Holdings to Bring Digital Securities to Japan
After spending months developing within the confines of the MAS FinTech Sandbox, digital exchange, ‘iSTOX’, looks to take its first large step forward – towards Japan.
It was recently
announced that Japan based, Tokai Tokyo Financial Holdings, has acquired a minority share of ICHX Tech (iSTOX ‘mother-company’).
This move represents a first for iSTOX, as the company looks to eventually offer their services to investors worldwide.
iSTOX has had a successful year, as they have been on the receiving end of various investments over this time. The first major example would be the globally renowned, Singapore Exchange (SGX), followed by a series of companies in the following months.
This latest investment, which totals $4.58M, equates to a 4.58% share in ICHX Tech. By acquiring the position, it is expected that digital securities, hosted on the iSTOX platform, will now be available to Japanese investors; this being possible through the brokerage capabilities of Tokai Tokyo Financial Holdings.
MAS FinTech SandBox
One of the reasons behind the success experienced thus far by iSTOX, can be owed to the fact that they are one of a very select group to be admitted into the Monetary Authority of Singapore (MAS) FinTech Sandbox.
This program allows for companies to trial new technologies and products, within a structured environment, allowing for continued public/client protective measures.
iSTOX is a subsidiary of Singapore based, ICHX Tech, which was founded in 2017. The company is fervently working to develop, and attain, adoption for their digital securities exchange. This platform, which is currently operative and accessible by accredited investors, is expected to make a full launch in Q4 of 2019.
CEO, Danny Toe, currently oversees company operations.
The team at iSTOX recently announced new growth, as they welcomed a new CCO – Oi Yee Choo. The following article takes a closer look Oi Yee Choo and what she brings to the table.
Operating out of Tokyo, Japan, Tokai Tokyo Financial Holdings is an investment firm, which was founded in 1929. The company is able to offer its clientele a variety of services, pertinent to securities, such as brokerage, distribution, and more.
Company operations are currently overseen by CEO, Tateaki Ishida.
In Other News
Singapore has rapidly established themselves as a leader within digital securities. With clear regulation, and forward thinking, companies have been able to effectively establish themselves within the Asian nation. The following articles are a few examples, highlighting industry moves which involve Singapore.