One week after the SEC approved Overstock’s plan to issue stock via the Bitcoin blockchain, company CEO Patrick Byrne gave the keynote address – called “The Virtues of Crypto-Settlement” – at the Inside Bitcoins Conference in the San Diego Convention Center.
Byrne, whose firm was bitcoin’s first major retailer, spoke at length about his firm’s plans, launched at the website, t0.com. He lamented the “crazy system” of Wall Street banks and said there is
“all kinds of room for mischief.” That’s why Byrne has developed an alternative.
“This system is transparent and reduces costs we believe 80%, maybe as much as 90%,” the CEO said. “It eliminates settlement-based mischief.” Byrne says the system has been thoroughly tested. The initial application was filed in April. He spoke of the overall process during his speech.
The SEC asked Overstock, “You want to trade Crypto-securities?”. Bryne said they then sent over “pages and pages of questions.” After Overstock answered, they sent back more questions. Byrne suggested this happened three or four times, mentioning the millions of dollars of paperwork this implies.
“On Friday they said the system is ready to go, we approve it,” Byrne said. “Overstock has the green light to actually trade crypto-securities.” Byrne quipped he was not offering anyone stake in any securities by making the announcement.
“We have now built the technology and the system [for] crypto-trading,” he said. “The SEC has been studying it for months and months and as of Friday its been blessed with holy water by the SEC.” Byrne said he would be thinking about the firm’s overall plans this Christmas vacation.
“I am trying to figure out this Christmas vacation, ‘Is there a security we want to issue?” he said. He says that this will likely cause a chain reaction in the space.
“Once one company has the initiative to go forward and issue them,” others will follow suit.
“The code name we developed it under was ‘Medici’ but the go-to-market name is t0.com,” Byrne said. He explained the inspiration for the name.
“Trades in the US settle on a T+3 basis – when I’m at E-Trade and you’re at IBC and we do [a transaction] today, the trade doesn’t settle in the backroom for three days,” Bryne elucidated. “European countries are at a t+2. It has nothing to do with the technology, but the interest of bankers.”
Byrne said he “sure did” make efforts to protect the Intellectual Property of the system when asked by an audience member. “I think we have five patents, and we applied for some quite early in the game.”
There are many applications for this tech and it is IP protected, Byrnes said. “We applied for the intersection of crypto and ETFs and built that out crypto-Stockloans, Crypto-ETF’s and crypto-trading.”
t0 is applicable to international offerings and publicly traded companies. The interested party must first file an S1 with the SEC. Byrne also confirmed there are no stock certificates traded, the only stock exists within t0’s “ledger-agnostic” system. He stressed the transparent approach of Overstock.
“I didn’t want to do this in a Mt Gox type way,” Byrne said. “I wanted to do this in the heart of regulation.” There are many uses for his system, Byrne believes.
“A broker-dealer could ally with us and use this and you don’t really need the exchanges or the settlement system,” he said. Or, “an exchange could ally with us and suddenly you don’t really need a settlement system.” Byrne also expressed his belief that 2016 would see a new trend emerge in Bitcoin.
“There’s going to be an opportunity for a lot of [people in banking] to defect in 2016, maybe en masse,” he said. While seeking approval for t0, Byrnes said he was worried about pushback from the regulators, but, to his relief, did not experience any.
“I worried regulators would slow this technology down to let their client industries, like Wall Street, catch up,” Byrnes said. “It took about six or seven months to get this through. I guess looking back, giving this is a whole new world, it doesn’t seem out of line.” Byrne expressed the idea that regulators wish to see technology like t0.com happen.
“They don’t want to be under the thumb of Wall Street,” he said. “What’s happening is Wall Street is trying to slow us down before they come up with their own version.”
t0 was built to be “ledger-agnostic,” Byrne explained to the audience. “It hashes proof-trade into blockchain, but we can actually integrate into anybody’s ledger in about 2-3 weeks work,” he said. Byrne said his team decided not to bet on other emerging Bitcoin technologies, like Ripple, Circle, Chain or others.
“[We decided] let’s build it to be ledger-agnostic and as different ledgers appear, with different features, we’ll be able to switch between them,” Byrne explained.
In order to use t0, one will still have to use eTrade or another financial services company because “we don’t want AML and KYC obligations.” t0 is looking into its options.
“We are talking with a company, IdentityMind,” he said. “I didn’t want to have the KYC-AML obligations because there is so much friction involved in that.” During this speech, Byrnes also spoke of the attention Bitcoin has received in 2015 from big banks.
“All summer long, and all Fall, all we heard about was another bank putting money in [the Bitcoin space],” Byrne said. “Wall Street is running around like mad trying to get in front of this.”
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