Security Token news for Week Ending Friday 10 April 2020

Security Token news for Week Ending Friday 3 April 2020This week, our Editor is giving Sheldon Freedman a break so that he can celebrate Passover.

Here is our pick of the 3 most important Security Tokens news stories during the week:

The SEC wheels grind slowly over tZero Overstock

That is our headline based on a legally dense 16 page statement issued by the SEC, of which this is a small extract:

As described in the Notice,8 the Exchange proposes to adopt the Amended and Restated Limited Liability Company Agreement of BSTX (the “BSTX LLC Agreement”) for BSTX as a facility of the Exchange. 9 BSTX proposes to operate a fully automated, price-time priority execution system to list and trade NMS stocks that meet BSTX listing standards and for which ancillary records of ownership reflecting certain end-of-day security token balances as reported by market participants would be created and maintained using distributed ledger technology (such securities to be referred to as “security tokens”).10

Why it matters: tZero could be a major player in Security Tokens for reasons we have covered many times on Daily Fintech. However to fulfil that promise they have to play in the regulated world where the SEC is the top cop – and that takes time, capital and persistence.

Overstock Is Set to Finally Pay Out Its Digital Security Shareholder Dividend

Overstock.com plans to distribute its long-delayed “digital security” shareholder dividend on May 19.

Shareholders will receive one Digital Voting Series A-1 Preferred Stock (OSTKO) for every 10 of the online retailer’s shares they hold on April 27, the record date, according to Overstock’s Tuesday press release. OSKTO is a “digitally enhanced security” that trades on affiliate tZERO’s blockchain-backed platform – the only trading system that can support it.

If the distribution goes without a hitch, it may validate a corporate gambit whose creator, former Overstock CEO Patrick Byrne, considered revolutionary. Byrne thought the blockchain dividend could drive growth for tZERO’s blockchain trading system and simultaneously “expose the slop” he said was inherent to Wall Street’s capital markets. 

Why it matters: Featuring two of our three stories about tZero seems like overkill, but this story scored a 7 on the Daily Fintech News Quality Analysis (NQA) methodology. It also exemplifies the devil in the details nature of being a major player in Security Tokens in the regulated world. Finally, old fashioned Dividends are back in fashion after the Coronacrash took the froth out of the market.

R3 Teams With Custodian Hex Trust to Help Asian Banks Sell Security Tokens

Asian banks interested in issuing security tokens on R3’s Corda now have a local custodian.

Hong Kong-based Hex Trust is partnering with the enterprise blockchain company to offer banking clients another option for issuing security tokens. The custodian began working with R3 when one of its clients issued collateral tokens for derivatives on Corda. 

“A lot of the new demand coming is for Corda-based tokens or other similar blockchain-based protocols,” Hex Trust CEO Alessio Quaglini said. The custodian joins the roughly 10 other custody firms R3 works with globally. 

Why it matters:  This one bumped a high scoring news item about the SEC; we did not want to look like an outlet for SEC news – but there is good stuff  on our cutting room floor. We think this story matters for two reasons. One it may make security tokens more popular in Asia (which has so far lagged behind Europe and America in adoption). Two, custody is a critical and complex plank that tokenised assets have to get right.

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Editors Note: it was a busy news week in  Security Tokens. We counted 4 stories that scored our minimum target of 6 on the Daily Fintech News Quality Analysis (NQA) methodology and 2 that got close with 5. Plus some good opinion and analysis. So plenty of good stuff had to go on our cutting room floor.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

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