Initial Coin Offerings (ICO) have raised more than $4 billion USD since 2013, and government agencies are analyzing their regulatory implications. Some tokens issued through such an offering may be considered ‘securities tokens’ and even be in violation of securities laws.
A new, decentralized protocol, however, is setting out to make it easier than ever to issue asset-backed blockchain tokens. And that includes securities.
“Polymath facilitates securities tokens on the blockchain through a network of coordinated participants who are incentivized by POLY, our native token,” Polymath Founder and CEO Trevor Koverko tells CCN. “We’ve created a new token standard that bakes requirements, such as KYC and AML, into the tokens themselves.”
The Polymath platform is designed to lower the barriers for businesses and issuers of financial products to launch securities tokens on the blockchain. “By introducing a simple marketplace for securities issuances and secondary trading, the Polymath platform helps to bridge the gap between traditional securities and blockchain-based asset ownership and investment opportunities,” says the former NHL draft pick turned Silicon Valley entrepreneur. The Polymath network will be an open protocol.
“Our platform can help spur economic growth and opportunities to more people and in more places than ever before,” Koverko notes. “With the multi-trillion dollar securities industry coming to the blockchain, the Polymath platform allows individuals and companies to participate in the decentralized economy.”
At its core, Polymath is made up of a set of smart contracts designed to store data about participants in its network, while governing how they can interact in accordance with regional, national, and international regulations. Participants on this network include KYC providers, legal delegates, smart contract developers, token issuers and investors.
Data on a blockchain is often public. The same is true of Polymath, where token purchasers are pseudonymous, but transaction data is public. A rich set of data about the activity of KYC providers, law firms, and smart contract developers is there for all to see on the platform. Participants can, therefore, learn about the offerings in which they were involved.
“Our closed-loop system can aid participants to separate the high-quality bids from the low-quality ones, whether they are legal delegates, smart contract writers, issuers, or KYC providers,” notes Kovervko, who was among Canada’s most active blockchain investors in 2016. “Polymath aims to be structured in such a way that, over time, the most effective legal delegates, reliable KYC providers, and the best Solidity smart contract developers will float to the top.”
Polymath could represent an improvement over traditional means of wealth ownership. “For today's securities issuances, you retrieve some data from the stock market about share prices sold. But data captured from Polymath-based transactions has the potential to represent a richer data set about the trading of securities.”
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