Inside sources say Nasdaq is looking to create a platform for cryptocurrency security tokens. This development is the latest in a series of reports of the U.S.-based stock exchange operator taking steps to enter the digital asset space.
Nasdaq and Cryptocurrency Security Tokens
According to reports, Nasdaq plans to develop a platform where companies can conduct sales of security tokens in a similar manner to the popular initial coin offering (ICO) crowdsale fundraising. These security token offerings (STOs) are, in effect, crowdsales for regulated ICO tokens.
Reports indicate that Nasdaq is pushing through with these plans, holding high-level talks with Symbiont – a blockchain startup focusing on institutional blockchain solutions. According to the inside sources, the proposed Nasdaq platform will both issue and trade cryptocurrency security tokens. Although this changes a bit the way we see traditional stock brokers, the structure of the market has changed a little over the years, and as the website TodayTrader explains, the tendency is that everything changes to an online exchange server, where all the orders are automatically executed.
Nasdaq’s interest in security tokens isn’t a new development. In 2015, Nasdaq partnered with Chain.com to conduct the first-ever blockchain-based private securities issuance. If the stock exchange behemoth goes ahead with its plans, it will become the latest entrant into the rapidly growing niche of crypto securities trading which already has participants like tZero and Polymath.
The Emerging Security Token Narrative
For Nasdaq, a foray into cryptocurrency security tokens seems like a natural progression given the company’s involvement with the emerging asset class. Earlier in the year, Nasdaq CEO Adena Friedman said the stock exchange operator would consider becoming a cryptocurrency exchange platform once the regulatory landscape becomes more mature.
In mid-2018, an article on the Nasdaq website described security tokens as an amalgam of utility tokens and venture capital. A portion of the article reads:
We believe security tokens act as a natural bridge between traditional finance like venture capital and Blockchain and benefit both equally.
For many observers, the utility token-dominated ICO space has left a lot to be desired. Regulators like the SEC even insist that ICO tokens are securities despite many startups claiming their offerings to be utility tokens.
Security tokens being virtual representations of real asset ownership remove many of the regulatory obstacles found in utility tokens. They fulfill both the provision of liquidity to startups and the ownership of equity for the investor while being under the purview of securities regulation.
Furthermore, the issuance and trading of security tokens take place on an immutable blockchain which will have a marked positive impact on transaction settlement. Also, investors will be able to trade real estate, cryptocurrency assets, equity, and debt on the same platform.
Do you think the proposed Nasdaq security token platform would positively impact the legitimacy of the emerging cryptocurrency trading industry? Let us know your thoughts in the comment section below.
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