While there is a lot of public talk about governance models in blockchain, there has been less widespread emphasis on regulations. This is in large part due to governments, who have been behind the curve in understanding how this technology works, as well as in their ability to foresee potential uses. That said, one of the industries blockchain broadly and cryptocurrency specifically will be disrupting is securities. While electronically-represented securities existed before blockchain, when the transaction and communication speeds are up to par we’re about to see a shift in issuing, trading, and managing securities sales around the planet. With just a few hundred lines of code, smart contracts will fundamentally shift the nature of financial transactions.

As Primavera De Filippi and Aaron Wright note in Blockchain and the Law: The Rule of Code,

By making it increasingly easy to create, disseminate, and trade securities in ways that were not possible before, blockchains do to securities law what the Internet did to copyright law.

Physical music and, to an extent books, were heavily pirated, but nothing like what occurred with Napster and file sharing. Copyright laws changed dramatically. The authors speculate that securities trading is about to undergo such a revolution.

Foreseeing this movement, Augmate, an IoT and Wearable Device Management company (in the RChain portfolio), recently launched its own digital security, $MATE. Thus far the company has cast a wide financial net, using traditional equity, sales, and now digital securities in its model. Clients since Augmate’s 2013 founding have included UPS, Toyota, L’Oreal, and Peugot. This move into securities makes sound economic sense to the organization, as well as being an attempt to stay in compliance with regulations:

The funding side of the blockchain evolution (cryptoasset) is like an uncharted sea. Initially, DLT projects were using a form of a cryptocurrency referred to as a utility token. In order to be regulatory compliant, we met with trusted advisors and securities law experts to ensure we were moving in a direction that protected the company from regulatory risk. As time goes by, regulators around the world are providing guidance on how a cryptoasset should be treated. Our decision to create a security token, now called a digital security was not easy to make but we firmly believe that this is the future of fund raising using cryptoassets. We will continue to be aggressively pragmatic in our use of new funding vehicles and in staying within regulatory compliance.

Though large-scale projects like Intercontinental Exchange’s Baakt were recently delayed, the fact that the world’s largest financial players are entering the blockchain space is a certain sign that more regulations will follow. What that means for truly decentralized projects versus private blockchains is open for debate, but there’s no doubt that governments are watching.

 

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