This week some of the largest crypto exchanges in North America announced the creation of the Crypto Rating Council. This self-regulatory group seeks to add clarity to the crypto space through the introduction of a universal scaling system. If successful, future crypto investors will have a reliable way to determine the classification of a particular token.
Diverse Members from Across the Continent
The Crypto Rating Council includes a diverse membership from the crypto space. Anchorage, Bittrex, Circle, Coinbase, DRW Cumberland, Genesis, Grayscale Investments, and Kraken are recognized as the official founders.
More Clarity for the Entire Market
This crypto mega-group seeks to provide a platform to help exchanges, custodians, trading desks, investment firms, and investors determine if a token is a security. The council believes the added clarity is necessary to provide investors with more confidence.
According to the Crypto Rating Council website, the goal of the organization is to “consistently and objectively assess a crypto” to determine if it falls under the Securities and Exchange act of 1934. This service is crucial, especially when you consider that many investors find it difficult to determine if a digital asset is a security, a commodity, currency, or utility.
This confusion arises because of the vast diversity in the token market and the ever-changing legal framework. In the past, investors and companies have felt the wrath of the SEC for engaging in illegal securities offerings. This group feels like it can prevent future investors from getting burned.
The Crypto Ratings Council System
The Crypto Ratings Council system utilizes a combination of key factors in order to deliver a consistent, unbiased, and accurate rating based on a token’s contributing factors. To create the ranking system, developers incorporated the recent SEC guidance on the token classification and the Howie Test. Additionally, a litany of case law became part of the equation.
After these traditional litmus tests, the token undergoes a thorough technical analysis. These tests are necessary to determine its true functionality. Since today, there are more types of tokens than ever before, this rating system is ideal in simplifying the entire investment process.
The Crypto Rating Council utilizes a simple 1 -5 rating scale. Currencies, such as Bitcoin receive a rank of 1. Respectfully, tokens in the 1-2 range are not securities. For example, Bitcoin is a 1, whereas, Ethereum is a 2 on this scale. Basically, the more a token leans towards being a security, the higher it ranks on the scale.
Tokens that pay dividends, or give voting rights, rank 5 as securities. These tokens are going to include any token where you expect profits from the contributions of another party. This ranking also includes tokenized equities, securities, and various other debt instruments.
Crypto Rating Council is Active
The Crypto Rating Council issued its first ranking this week. The layout of the rankings is straight forward. Each company has a card that lists some details about the platform and its respective rank.
Self-Regulation is Coming
This month has seen the formation of multiple self-regulatory organizations. This latest news showcases how the industry will push through a framework to provide more clarity, even when lawmakers are unable to. You can expect to see this organization play a pivotal role in the development of future blockchain legislation.
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.