By Vanessa Malone
We believe that blockchain technology will completely evolve how the world issues and trades securities. We also believe that solutions like Horizon’s one-stop-shop will help streamline the transition for issuers, investors, and other industry participants. Here are 5 ways we’re working to fuel security token adoption, or what we like to call digital securities.
1. Increase education as to why digital securities offer issuers and investors more than a traditional private placement or securities offering
There are many benefits digital securities offerings have over traditional securities offerings. Blockchain-enabled securities offer unparalleled transparency, especially when incorporating a large, public blockchain. For example our blockchain solutions are based on the Ethereum public blockchain, and records of all transactions from issuance through to secondary trading are immutably and securely stored for everyone to see. This protects investors and ensures issuers are held accountable. Another key benefit is increased liquidity potential as investors are able to trade globally 24/7, with T+0 settlements through a much more efficient and transparent process. Other benefits include greater compliance, improving cap table/ shareholder management, distributions, and payments, etc. You can learn more about those in this blog here.
It’s important that the industry band together to expand the circle and reach new curious individuals, instead of solely writing in an echo chamber of people who already know the amazing things blockchain technology is doing. This is done through forums, blogs, webinars, etc. One thing that helped people feel comfortable investing in Reg A+ deals was to take out the acronym “Reg A+” from focus and instead focus on how everyone now has access to invest in early-stage investment opportunities. I think the blockchain community could apply this method. People don’t necessarily need to know the deep intricacies of a blockchain, just how it is changing the world for them.
2. Lower the barrier of entry for issuers
Raising capital is a challenging feat in itself, with lots of moving parts, entities and team members working to complete a successful round of fundraising. Those choosing to go the digital securities offering route have to research, coordinate, and pay multiple service providers who, in turn, refer to more third parties, or their so-called API’s, for each step of a digital securities offering.
All these extra steps and costs greatly contradict the point of conducting a digital securities offering through Reg A+ or Reg D, which are meant to shorten and offer a less expensive and a less extensive capital raise than a traditional IPO.
This is why we are happy to offer issuers a true one-stop-shop for digital securities offerings. Issuers can come to us for tokenization, KYC/AML investor onboarding, and custody tools for their designated transfer agent to custody and manage digital securities, as well as transfer the securities to a regulated ATS for secondary trading. We believe having access to a vertically integrated technology suite greatly streamlines the process from issuance through to secondary trading.
3. Lower the barrier of entry for investors
The ability for everyday investors to gain access to early stage investment opportunities alongside high-net worth individuals is still relatively new. We have the JOBs ACT of 2012 to thank for it’s new policy additions including general solicitation, which came into full effect for Rule 506(c) of Regulation D (Reg D) and Regulation A (Reg A+) in 2013 and 2015, respectively. These regulations allow companies to market their investment opportunity to fans, customers, and the general public.
Digital securities are an even newer concept. You can learn about the collision of Wall Street and blockchain here. ICO, STO, DSO, wallets — all these add complex acronyms and jargon that may cloud an otherwise exciting and unique investment opportunity that Reg A+ digital securities offering may offer.
We believe that the way to encourage mass adoption is to familiarize an unfamiliar process. We do this by making our blockchain software solutions user-friendly and accessible. In fact, our KYC/AML onboarding app digitizes the entire investment process. All investors have to do is download an app, which is branded to whichever issuer is conducting the offering, and they’re prompted through a secure and intuitive onboarding process. We even added a feature for investors unfamiliar with the blockchain to create a wallet directly in the app with the click of a button. By integrating compliance and user experience into a high tech high touch app, we hope to engage the investors of all levels and make the process as seamless as possible.
4. Increase liquidity through trusted, connected, user-friendly trading venues
Currently, there are no liquid trading venues that exist for digital securities, and the options that exist have very low volume and do not seem up to par with the speed, experience, and volume present on a traditional or crypto exchange.
This is why Horizon developed our digital securities exchange software, Open Order Book, to power an interconnected network of digital securities exchanges around the globe. The technology pairs with a retail trading app where investors of all levels can buy, sell, and instantly settle digital assets directly from their smartphone. Yet unlike the issues rampant on many crypto exchanges today, Open Order Book features no market makers, no wash trades, inaccurate volumes, or other manipulations. Best bids and offers are transparently displayed on the Ethereum public blockchain. Horizon recently announced an MOU with the government of Antigua to power their digital stock exchange. Stay tuned for future growth in our global network.
5. Help establish regulatory clarity
There are big unanswered questions on how blockchain securities markets should be regulated, the same goes for crypto commodity markets and the other sectors of the multifaceted ecosystem. What’s frustrating for everyone is that the complexity and lack of regulatory clarity is stifling development for those who want to do right by the law, simply because the laws may not exist yet or because regulators may not understand the new tech.
This is why Horizon decided to go straight to the source, and begin hosting a series of forums to facilitate a much needed dialogue between industry leaders and regulators. The first forum is hosted by Horizon and RSM US LLP and is taking place Nov.5th in Times Square with senior regulators and industry trailblazers. Interested attendees can request a invite here:
Above are just a few of the ways we hope to lead the evolution of securities. To learn more about Horizon’s one-stop-shop for digital securities, visit us at https://horizon-globex.com.