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Provenance Facilitates Securitization & Issuance of $150M in Bonds

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$150 Million

A group batch of loans, structured as HELOCs, have successfully been securitized and issued as bonds to investors on Provenance, by a group of enterprising companies.  This process saw $150 million worth of these asset-backed loans undergo the process, entirely with the use of blockchain.

Figure Technologies, who spearheaded the endeavour, believes that this is the first example of bonds being issued solely through the use of blockchain.

Group Effort

While this endeavour may have been spearheaded by Figure Technologies, they are not the only ones that played a role.  The following companies each took part in the securitization in varying capacities:

  • Figure
  • Jeffries Group
  • Nomura Securities
  • Tilden Park Capital

Provenance

The blockchain that made this securitization possible is known as Provenance.  When describing the benefits of their platform, the company states,

“The distributed, trustless and immutable characteristics of blockchain eliminate costs from intermediaries, automate inefficient operational processes, reduce risk through data reliability, and enable innovative new products.”

A Quick Look at the Provenance Blockchain

While Provenance began life as a product of Figure Technologies, the company underwent emancipation in 2019.  This occurred upon completion of a lucrative, and successful, STO, which saw the company generate $20 million in investments.

Since this event, Provenance has made it clear that a focus of theirs would be to change the way real estate is managed.  At the time of their STO coming to a close, they indicated a desire to be the first at achieving the following:

  • hedge fund on a blockchain
  • real estate title entirely on blockchain
  • digital mortgage on blockchain

Clearly, today’s news of the securitization of a group of HELOCs is right up their alley.

Provenance.io Completes $20 Million Security Token Offering

Commentary

Upon announcing the successful completion of the securitization, representatives from multiple of the participating companies took their time to comment.  The following is what each had to say on the matter.

Mike Cagney, CEO of Figure, stated,

“Blockchain has an almost incalculable potential for unlocking value for the world’s financial markets and we’re spearheading that transformation by taking on the big challenges like securitization…Until now, the industry has been slow to move past white papers and proof of concept projects. But this first ever production-level blockchain ABS achievement importantly underscores that the times are changing.”

Sanil Patel, Managing Director of Nomura Securities International, stated,

“Nomura is proud to have been a lead underwriter on Figure’s inaugural securitization on Provenance…Provenance is leading the way toward creating a more accessible securitization market, one where smaller issuers may securitize assets at a lower cost than the traditional model.”

Brian McGrath, Managing Director of Jefferies Group, stated,

“We are happy to partner with Provenance to bring to market a deal that meets the needs of our clients utilizing their innovative technology.”

Figure Technologies

Founded in 2018, Figure maintains operations in San Francisco, California.  Above all, the company is looking to leverage blockchain and DLT, in an effort to transform FinTech.  Today’s discussion is an example of this implementation.

CEO, Mike Cagney, oversees company operations.

HELOC

A ‘HELOC’ simply refers to a home equity line of credit.  These are essentially credit lines which allow one to leverage equity in their home for financial flexibility – essentially an asset backed loan.  While standards for qualification may differ, depending on the region, the concept remains the same.

To date, many remain wary of HELOCs.  While they can provide great benefits when used correctly, they are not without their risks.  During the housing crisis, roughly 10 years ago, HELOC based bonds were of great popularity.  When the market collapsed, many were left owing more on their homes than they were worth.  As a result, there was a simultaneous collapse of the associated bonds.

HELOC backed bonds fell out of fashion for multiple years, but have recently seen a resurgence.

In Others News

If the idea of merging blockchain and DLT with bonds sounds familiar to you, it may be, in part, due to the following instances.  Over the past year, a variety of banks have seen the merit behind this infusion of technology, and have done their best to trial it.  Make sure to peruse the following articles to learn more about how banks around the world are faring.

Santander Redeems Debt Security Early

Horizon Tech Stack Makes Piemonte Bond Issuance a Reality

Societe Generale SFH turns to Ethereum for Issuance of Security Token

World Bank Raises $33.8 Million via Tokenized Bonds

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

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NRI Issues First Japanese Tokenized Bond

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NRI - Japan First Tokenized Bonds

This week, the IT service provider and consultancy company, Nomura Research Institute (NRI) became the first platform to offer blockchain-based digital bonds directly to Japanese investors. The news falls-in-line with the group’s overall goal to expand tokenization efforts in the Japanese market.

Specifically, NRI issued two bonds. The first bond was a 25M yen ($232,000) bond with a three-month maturity. Interestingly, this bond differs from traditional bonds in that there is no interest paid to holders. Instead, these “digital asset bonds” pay redeemable points. Importantly, the second bond does pay holders a low-interest rate. This bond saw a 5M yen issuance.

The Nomura Group Makes it Happen

In order to bring this important milestone to the Japanese market, NRI utilized multiple partnerships within its sphere. Specifically, Nomura Securities acted as the underwriter for the tokenized bonds. Additionally, BOOSTRY is the registry agent for the issuance. Importantly, last year NRI and Nomura created BOOSTRY as part of a joint venture. Interestingly, the firms started the BOOSTRY project back in 2015.

NRI Message from President

NRI Message from President

BOOSTRY’s goal was to develop a blockchain platform for the exchange of securities. The tokenized asset platform under creation – ibet is to provide more efficiency, liquidity, and security to the market. Notably, the BOOSTRY project began with an $11M capital investment. Currently, Nomura has a 6% stake in the firm, while NRI holds a 34% share.

Nomura Crypto – NRI

The Nomura group continues to expand into the blockchain sector in a major way. In Q1, the Nomura Research created a cryptocurrency index to service the growing market demand. This month also saw the Nomura Institute of Capital Markets Research create a department specifically focused on blockchain financial instruments such as security token offerings (STO).

The goal of the group is to gather issuers, asset managers, settlement agencies, legal experts, and academics to focus on blockchain integration and its effects on the market. The group currently consists of some heavy hitters in the sector including

  • Tokio Marine & Nichido Fire Insurance
  • Nishimura & Asahi
  • NTT
  • Anderson
  • Mori & Tomotsune
  • JCB, Daiichi Life Insurance
  • Nomura Securities
  • Nomura Trust
  • Banking
  • Nomura Research Institute
  • BOOSTRY
  • Fujitsu
  • Mitsui and Mitsui Fudosan
  • Nomura Asset Management
  • Nomura Institute of Capital Markets Research

Investments into Blockchain – NRI

Last year, the company also invested in the smart contract development firm Omise Holdings, the parent company of OmiseGo (OMG) and GO.Exchange. The investment increased operations for the firm across a number of verticals. Additionally, the exchange Quantstamp secured funding from the firm on March 8, 2019. As part of the deal, the U.S.-based firm opened a subsidiary in Japan. Quantstamp provides an automated tool for developers and users that helps locate vulnerabilities in smart contracts. Also, the company offers auditing services for large-scale blockchain platforms.

Nomura Pushes Tokenization in Asia

Nomura continues to be a major advocate for tokenization in the financial sector. As such, the company is ideally positioned for the digitization of the markets. You can expect to hear more exciting developments from this team, as their projects continue to shape the Japanese market moving forward.

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Arca Funds Seeks to Tokenize US Treasury Bonds

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Arca Funds to Tokenize US Treasuries

This week, Arca Funds announced it will seek regulatory approval to begin tokenization of US Treasury Bonds. Importantly, this filing isn’t the first time Arca sought SEC approval for a new blockchain-based platform. The news showcases the further integration of blockchain technology into the traditional financial sector, as well as, further determination on the part of Arca Funds to bring their products to the market.

Arca Funds

The Los Angeles-based fund management firm, Arca Funds, seeks to provide investors with a modern alternative to the current outdated Treasury Bond systems in use. The firm believes that only tokenization can provide more efficiency in the market. As such, Arca Funds hopes to capture a majority share of the tokenized bonds sector moving forward. This strategy puts Arca Funds in a profitable situation. According to a recent report by Morningstar, there is approximately $330 billion of funds devoted to investing in government bonds, dominated by U.S. Treasuries.

SEC Approval

As it stands now, Arca’s SEC filing represents a major milestone in the market. If successful, Arca would become the first tokenized fund to be fully authorized under the Investment Company Act of 1940. Consequently, the platform could offer its service to most U.S. traders.

Arca Funds via Homepage

Arca Funds via Homepage

Arca executives labeled the new financial instrument a blockchain-traded fund. Importantly, the new technology provides faster transactions than Wall Street’s current market systems. Additionally, it eliminates many of the middlemen. For example, the current system requires you to buy bonds from a broker or acquire shares in a fund. All of these third-parties increase the cost of your transactions.

Pay for Goods?

Interestingly, developers envision a day in which you could pay for goods or services using the Treasury-fund tokens. Discussing this possibility in the very near future, Arca CEO Rayne Steinberg spoke on how technology makes it possible to “collapse the space between payments and investment vehicles.”

ArCoin

Investors in the Arca Fund receive ArCoins for their participation. These coins reside on the Ethereum blockchain network. Specifically, the tokens are the popular ERC-1404 standard. As such, they provide users with the highest level of interoperability within the Ethereum ecosystem

Arca Funds Partners

As part of the strategy, Fifth Third Bank, one of the largest banks in Ohio, agreed to function as the custodian for the tokens. Also,  DTAC LLC signed on as the platform’s transfer agent. Importantly, DTAC is a subsidiary of TokenSoft, a major player in the tokenization market.

SEC Rejections

Unfortunately, Arca Funds has its work cut out for it. The SEC repeatedly denied EFTs to date. Importantly, Arca was part of a Bitcoin ETF filing last summer with Wilshire Phoenix. The firms were denied. Then, the firms filed again just last month. The SEC rejected the second filing on the grounds that Wilshire Phoenix had not proven the bitcoin (BTC) market is sufficiently resistant to market manipulation. The denial was met with discourse to the point that SEC Commissioner Hester PeirceHester Peirce published a dissent.

Arca Funds – Determination

Arca Funds continues to seek SEC approval to bring new and exciting financial tools to the market. Hopefully, in the near future, regulators will give the firm the fair attention it deserves. For now, these developers continue to pioneer new tokenization strategies.

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Spencer Dinwiddie DREAM Shares launches January 13th

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Spencer Dinwiddie DREAM Shares launches January 13th

After a sizable delay and numerous run-ins with NBA executives, it now appears that Brooklyn Nets point guard Spencer Dinwiddie will get to bring his tokenization strategy to the market. Dinwiddie took serious heat from the league when he announced plans to tokenize a portion of his contract. Now, after almost three months of delays, Dinwiddie’s token-based investment tool prepares to enter the market.

DREAM Fan Shares

Dinwiddie wants to let his fans own a portion of his contract via the DREAM fan shares platform. This blockchain-based tokenization strategy would allow Dinwiddie to digitize a portion of his contract. These tokenized shares would then be made available to fans seeking to increase their stake in the athlete’s career.

According to Dinwiddie, DREAM shares are set for a January 13th launch date. The date will coincide with Dinwiddie’s first career All-Star Game. In this manner, Dinwiddie can couple the publicity to further promote his unique tokenization strategy.

As part of this strategy, Dinwiddie seeks to sell 90 SD8 coins. Each coin represents a tokenized share in his $34 million contract. If successful, Dinwiddie will be able to collect up to $13.5 million of his guaranteed three-year agreement without having to wait until the final years of the contract. In essence, the agreement provides him with a new age business loan.

NBA Officials not Pleased

For their part, the NBA has been unapathetic towards the young player’s decision to tokenize his contract. These disagreements with the NBA came to a head when the league threatened to terminate his contract and ban him from the league during negotiations. Luckily, Dinwiddie instituted some changes to his strategy which alleviated much of the league’s concerns.

One of the main problems the NBA had with Dinwiddie’s original strategy had to do with his final years. In the original agreement, Dinwiddie wanted to provide his investors with a chance to make larger dividends if he were to acquire a more lucrative contract with Brooklyn or another team. This section struck NBA officials as problematic with some calling it gambling. Officials were so concerned they threatened to terminate his contract if the clause wasn’t removed.

Dinwiddie to Tokenize Contract

Dinwiddie to Tokenize Contract

After four intense negotiations in person and three additional correspondences over the phone, Spencer Dinwiddie was able to secure league approval for his concept. Discussing the decision, he admitted that he never expected the league to support his idea fully. Luckily, he had some strong support for the plan from the Players Association. Also, he had a team of lawyers by his side to ensure that his rights were not violated.

Dinwiddie Just Changed the Game Forever

It’s not too often that a single player changes the game forever, but in this instance, Dinwiddie has utilized blockchain technology to provide more liquidity in the market. You can expect to see DREAM shares start to tokenize more athletes and entertainers’ contracts in the coming months. In this way, these individuals can cash out their multi-million dollar agreements without waiting years to do so.

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