Overstock subsidiary tZERO has announced a joint venture with Argon Group and RenGen LLC to launch the first ICO exchange that complies with SEC and FINRA regulations.
The ICO market, which the company describes as an alternative trading system (ATS), purports to facilitate the trading of security tokens while maintaining compliance with the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulations.
ICOs have raised more than $2 billion in 2017–including almost $800 million in Q2 alone–but U.S. startups and investors have had to navigate a murky regulatory environment, with most projects attempting to frame their token as a “utility coin” to hopefully avoid running afoul of SEC policies on securities trading.
Overstock CEO Patrick Byrne said increasing attention from institutional investors demonstrated there is a need for an exchange that can offer security tokens while also remaining compliant with SEC and FINRA regulations.
“With ICO blockchain offerings surpassing traditional early-stage VC funding and U.S. regulators seeking legitimate venues to support security token offerings, with this [joint venture] tZERO continues to maintain its leading edge in blockchain financial technology.”
Last year, Overstock began trading its company stock on tZERO’s private blockchain, and the tZERO trading system will serve as the backbone for the ICO exchange. Advisory service Argon Group will scrutinize tokens before they are listed on the platform, while RenGen will provide liquidity by serving as the platform’s market-maker.
Although many U.S. startups have attempted to skirt the securities classification when conducting token sales, Argon Group CEO and General Counsel Emma Channing encourages developers to embrace this label because it gives them the clearest path forward in terms of regulatory requirements.
“We have long been advocating that issuing digital tokens as securities give issuers and purchasers the greatest certainty about the legal regime that applies to the sale and the widest range of options to provide an attractive return for investors,” Channing stated. “This joint venture between tZERO, RenGen and Argon has the potential to completely change the face of ICOs.”
Indeed, this SEC-compliant ICO market could potentially initiate a monumental shift in the crypto finance industry, making the industry much more attractive to institutional investors and Wall Street firms.
“I have long believed that securitization is one of the best use cases for blockchain technology – and the transformative ICO market has proven so,” concluded Suleyman Duyar, Managing Partner, RenGen LLC. “It is a very exciting time to be an investor in ICOs.”
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