☠️Comply or 'Die'

You either Comply or 'Die' in finance

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Comply or Die ☠️

When it comes to the financial world, compliance is one of the most important aspects to pay careful attention to.

Why?

Companies/individuals that perform financial activities like broker-dealers, exchanges, custodians, issuance platforms, etc are required to follow a set of regulatory procedures put forth by the jurisdiction the company resides in.

If they don't, they will suffer not only monetary damages but more so significant reputational damage that may be impossible to recover from.

On top of that, especially in the U.S., individuals who are not registered financial representatives, do not have the authorization to promote investment opportunities.

According to a report by Simona Mola, the report’s author and a senior manager at Cornerstone Research… “the United States Securities and Exchange Commission was one of the top regulatory enforcers for cryptocurrency projects in the last seven years, resulting in $1.77 billion in penalties.”

The ICO era brought about lots of fraudulent activity from all walks of life.

Even musical artist T.I. had some ‘fun’ with ICOs…

Well, it just so happens the SEC does not care who you are.

T.I. ended up having to pay a $75K fine for illegally promoting an ICO and receiving $2.2MM of proceeds.

I know what you are thinking, “He only paid a $75K fine for $2.2MM? Who wouldn't do it?” That's a story for another time.

Anyways, I digress, I just thought that was an interesting thing to add.

The point is, you can't escape compliance, there is no way around it.

Not even Jim from The Office can hide his identity 😂

As the title of this topic reads, you either ‘Comply or Die.’

When I say ‘die’, I am merely saying the company or individual will be fined, barred from performing financial services, or even jailed if they don't abide by all regulatory rulings to the tee.

The security token industry is not any different, if anything there is more scrutiny because regulators do not want a repeat of the ICO era.

The moral of the story is, if you are conducting any financial services, hire a good securities lawyer to ensure that everything you are doing is legal.

The last thing you want to do is land in legal hot water.

Because…

When you do, it is near impossible to bounce back from it.


Security token blockchain platforms 📟

When all assets are tokenized and security tokens become mainstream, I don't think it will matter all that much which blockchain platform is used.

I personally believe that when it's all said and done, tokenization will be commoditized and it won’t matter which blockchain is utilized. All assets will be interoperable with each other, but that's a separate topic.

Currently, there are a handful of blockchain platforms that issuers leverage to underpin their assets.

Algorand, Tezos, & Ethereum, in my opinion, are the top 3 most leveraged right now.

However, one could claim that Ravencoin is too, but let's stick with the top 3.

I know many of the blockchain platforms have strong communities behind them, so I apologize if I offended any of you 😂

Let's break down the top 3:

Ethereum:

Overview: Founded by programmer Vitalik Buterin, it was announced in 2014 and went live July 31st, 2015. It was the world's first programmable blockchain - which means, you can encode a set of rules for applications on the network to operate.

Consensus mechanism: Proof of Work (PoW)

Notable security token companies who use it:

  • FAT Brands Inc. is a leading, global, multi-brand, restaurant franchising company that currently operates Fatburger, Buffalo’s Cafe, Buffalo's Express, and the Ponderosa & Bonanza Steakhouse concepts, with over 300 locations worldwide - they issued a $30MM bond

  • INX Limited, the first-ever SEC-registered IPO raised $80M+ for its digital assets exchange

  • RealT, an issuance platform focused on real estate, has officially tokenized $15 million in real estate properties sold. There are also 80+ properties trading on the secondary market

Algorand:

Overview: It was founded in 2017 by Silvio Micali, a professor at MIT and famous cryptographer. It has been live since June of 2019.

Consensus mechanism: Pure-Proof of Stake (PPoS)

Notable security token companies who use it:

  • Exodus, a crypto wallet with 1M+ users leveraged it for their $75M Reg A+ STO cryptocurrency wallet

  • Realio, a digital asset issuance and trading platform focused on real estate & private equity

  • World Chess, the company with the rights to broadcast the World Chess Championships, announced its plans to hold a hybrid Initial Public Offering (IPO) by selling 5% of its company in the form of security tokens built on Algorand

Tezos:

Overview: Tezos was designed by Waymo engineer Arthur Breitman and went live in September of 2018.

Consensus mechanism: Delegated-Proof of Stake (DPoS)

Notable security token companies who use it:

  • Elevated Returns, the company behind the St. Regis Aspen Hotel Resort - raised about $18MM+

  • tZERO partnered with Alliance investments to tokenize the real estate property, River Plaza - a 180-unit luxury residential development that is located in Manchester, UK

  • Fundament Group, a Germany-based security token issuance platform, has announced a partnership with Tezos to develop regulated digital securities. One of Fundament Group’s strategic investors, Bauwens Group has a managed project development pipeline of roughly $7.4 billion in real estate.

Lately, I have seen many more security token issuers utilize the Algorand blockchain.

It will be interesting to see which blockchain platform is sought out the most, but as I alluded to earlier, I don't think it's going to be dire to use one over the other.

Each platform offers similar functionality with slight differences.

Stay tuned!


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Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.