Tzero, a majority-owned subsidiary of Overstock, is launching an ICO trading platform that is fully compliant with the regulations of the United States Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority, Inc. (FINTRA), according to the company. The platform comprises an Alternative Trading System (ATS), meaning that it will not be subject to exchange regulations.
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Tzero’s ICO Trading Platform Will Legally Comprise an Alternative Trading System
Tzero is set to launch an Alternative Trading System in partnership with RenGem LLC, and the Argon Group. The Argon Group is an “investment bank with a focus on digital finance” that “provide[s] financial advisory, placement, and technology services to companies seeking to raise equity” through digital tokens backed by smart-contracts. RenGen LLC is an “investment, technology and financial services firm” that focuses on blockchain technology.
The joint venture will see Tzero develop the trading platform, whilst RenGen’s will provide liquidity and algorithm technology, and Argon Group will promote the ATS to its network of security token clients. Patrick Byrne has enthusiastically described the partnership, stating that “by combining our expertise with Argon’s advisory services and RenGen’s electronic trading, deep liquidity and market making capabilities, we are in a position to launch the only U.S. SEC compliant token trading venue.”
Initial coin offerings have generated more than $2billion USD this year so far, significantly overshadowing the approximately $1.2 billion USD raised through venture capital. Overstock CEO, Patrick Byrne believes that the launch of Tzero’s ATS is well-timed, emphasizing that “ICO blockchain offerings [are] surpassing traditional early-stage VC funding and U.S. regulators [are] seeking legitimate venues to support security token offerings.”
A Regulatory Compliant Trading Platform For ICOs Will Comprise a Major Step Forward for the Inital Coin Offering Industry
The establishment of the ATS comprises a direct response to SEC’s July 25 Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The Dao. The release establishes that the financial regulator would seek to regulate and crackdown on the issuance of unregistered securities through ICOs. The release also states that securities tokens may only be traded on a National Securities Exchange, or an ATS. All Alternative Trading Systems must file for approval with the United States SEC.
An ATS, also known as a multilateral trading facility (MTF), comprises a non-exchange trading venue that finds counterparties for transactions by matching buyers and sellers. Alternative Trading Systems are not subject to the same regulations as exchanges, as they are legally seen as an organization that provides or maintains a marketplace and brings together the buyers and sellers of securities. Since 1998, Alternative Trading Systems have been given the option of either “register[ing] as [a] national securities exchange”, or “register[ing] as broker-dealers.”
The arrival of the first regulatory compliant ICO trading platform will comprise a significant step forward for the initial coin offering industry, if Tzero has interpreted the law and SEC correctly. The future of the ICO industry has felt increasingly uncertain in recent months, as the financial regulators of numerous national governments have issued cautionary statements pertaining to initial coin offerings, including China’s all-out ban on tokenized crowdsales.
Do you expect that more companies will seek to follow in Tzero’s footsteps by filing to launch Alternative Trading Systems for ICOs? Share your thoughts in the comments section below!
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