tZERO Officially Issues its Preferred Security Tokens

One of the first compliant Security Token Offerings on a decentralized public network, tZERO, was recently completed as the tokens were issued on the Ethereum blockchain. This was almost a year long process for the Company as regulatory concerns delayed and impacted the ability to raise capital from investors that met the strict requirements of United States Securities Laws. As per the announcement, the Offering was conducted “in reliance on the exemptions from registration available under Rule 506(c) of Regulation D and Regulation S. The result was $134 million raised from over 1,000 global investors.

The Company has continued to execute on its roadmap with minor changes. As they continued to be focused on a compliant security, some changes have been made related to the ability to trade these tokens in secondary markets. However, most changes did not materially change timelines they originally expected. First, they have now issued all tokens to a tZERO custodial wallet for investors early in October. In accordance to the terms of the tokens, they will be locked there for 90 days which expires early 2019. After the expiration of the term, the Company is working on finalizing a platform in partnership with a broker-dealer to create a secondary market to trade said tokens. However, the only investors able to buy or sell the tokens will be those that meet the requirements of accredited investor status.

I believe this will be a great asset to monitor as it is breaking ground on the potential to continue to tokenize assets on a blockchain and create an ecosystem of investments in securities that provide greater disclosures and transparency that other assets in the space. This is one of the first assets that represent a claim to profits and assets of the underlying issuer. Most ICOs are regarded as Utility tokens which only provide its holder the right to use it for services or to acquire goods but do not represent and underlying stream of income or ownership of assets. This is why many Utility tokens are not easy to value with traditional financial models like Discounted Cash Flows and others. Most are valued solely by the demand and supply of a particular market relative to the speculation of the value of its utility. However, Security tokens will now have the ability to provide cash flows or value due to the underlying performance of the assets or income generated by the issuer. This could lead to more interest from traditional investors and institutions that deploy capital according to their investment policies and models.

In addition, tZERO announced that it continues to work on the creation of an approved trading platform for secondary trading to all types of investors around August of 2018. This would come by them registering the securities properly and will enable the tokens to trade in “more robust trading environments.” An example of such market would be the one being created with their announced partnership with BOX Digital Markets but it will also include international securities exchanges. This is will allow the Company to set the example of its ultimate goal to revolutionize the traditional Financial Markets utilizing blockchain technology. It could open the door to many institutions looking towards deploying said technology for future issuances of securities or capital raising efforts today dominated by the Investment Bankers of Wall Street who take a cut of each deal. As they mention in their letter to investors, “your tokens are, in short, yours: indelibly, immutably, transparently, yours.” I think this is a great achievement for blockchain technology in general as it represents the start of a potential disruption to an industry in need of change.

They had originally hoped that the tokens would be first available to trade for non-United States investors first, after the 90 day lock up but they decided to align all groups of investors to ensure regulatory compliance. The intent was to reduce the regulatory risk for the both the Company and its investors. While somewhat disappointing for some, I think it shows a great path for future projects considering similar capital deployments. Regulators have clearly been very active to many projects to ensure they oversee the capital raising process which has historically been dominated by traditional financial institutions. Their goal is to protect the investor and ensure the proper disclosures and processes are being met for United States securities. While the debate of where the line is between Securities and Utility really lies, most projects are becoming more careful and have actually started to go the securities route given some of the exemptions that exist already that can be leveraged. However, the ICO market has clearly slowed so opportunities remain low as the market watches the next steps of regulators, projects, and investors.

I continued to be excited and encourage with the development of blockchain technologies in the capital markets as there continues to be large efficiencies available to improve the speed, cost, and transparency of an industry that is known to take advantage of its customers to generate large profits for its executives and shareholders. If those can benefits its customers and the retail investors, it could materially increase the inclusion of groups that were not represented in the past. I look forward to seeing how this plays out as both an investor and a blockchain enthusiast!

Source: https://www.nasdaq.com/press-release/tzero-issues-preferred-tzero-security-tokens-20181016-01128

Follow me on Twitter: @NAICrypto

If you are like me and interested in continued personal growth, invest in yourself and lets help each other out by leveraging the resources they provide by using my referral link:
https://www.minnowbooster.com/referral/530636

Start your collection of Steem Monsters today at my referral link:
https://steemmonsters.com/?ref=newageinv

_{^{DISCLAIMER: The information discussed here is intended to enable the community to know my opinions and discuss them. It is not intended as and does not constitute investment advice or legal or tax advice or an offer to sell any asset to any person or a solicitation of any person of any offer to purchase any asset. The information here should not be construed as any endorsement, recommendation or sponsorship of any company or asset by me. There are inherent risks in relying on, using or retrieving any information found here, and I urge you to make sure you understand these risks before relying on, using or retrieving any information here. You should evaluate the information made available here, and you should seek the advice of professionals, as appropriate, to evaluate any opinion, advice, product, service or other information; I do not guarantee the suitability or potential value of any particular investment or information source. I may invest or otherwise hold an interest in these assets that may be discussed here.}}