The Salt Lake City-based online seller Overstock is dealing with an advanced new development: a new independent stock exchange powered by Bitcoin technology. The brand-new stock exchange might sidestep conventional stock market such as NYSE and NASDAQ and concern corporate stock directly over the Internet.
Overstock, one of the first and biggest online retailers to accept bitcoin payments, first announced the project in October 2014.
“There is a chance to recreate the financial world as we understand it in the parallel universe that is the blockchain,” Overstock’s CEO Patrick Byrne told Wired. “We are composing guidelines for this whole brand-new universe.” In a current Coin Telegraph interview, Byrne said that Overstock is building the platform that will certainly let companies issue a crypto-equity, which is a new frontier with lots of legal challenges.
On Friday, Overstock got one step more detailed to implementation. In a prospectus filed with the Securities and Exchange Commission (SEC), Overstock showed that it might issue up to $ 500 million in stock or other securities utilizing the blockchain innovation that powers Bitcoin.
“We may choose to offer securities as digital securities, indicating the securities will certainly be uncertificated securities, the ownership and transfer of which are tape-recorded on a cryptographically-secured distributed ledger system making use of technology much like (or the like) the dispersed ledger technology utilized for trading digital currencies,” reads the prospectus. “Digital securities are developed to allow trades to settle right away or almost immediately, unlike traditional securities, [and] make it possible for the securities holder to hold its securities directly or through its broker-dealer, outside the system for conventional securities.”
“The prospect of making use of a blockchain-like public ledger to hold securities or other possessions is quite amazing and one that need to be checked out,” Georgetown University professor of finance James Angel told Wired.
The theoretical language utilized in the filing shows that it is but the first official communication with the SEC, which may spend some time to absorb and give a green light to this novel and potentially disruptive method to securities.
The filing is a “rack registration” indicated to introduce future providings to regulators and investors slowly, with more detailed details anticipated to come later on. Nevertheless, Overstock’s CEO Patrick Byrne is confident: “I would not have actually taken all the time and difficulty and expense to do this if I didn’t intend on using it at some point soon,” he informed Wired.
Angel believes the SEC will certainly authorize the filing eventually, however financiers will certainly be initially careful.
The Overstock digital securities would not be listed for trading on existing stock exchanges, however traded exclusively on a particular trading system to be registered with the SEC as an Alternative Trading System (ATS). The prospectus highlights that the ATS will run with the speed and irrevocability appropriate to the immediate or nearly instant settlement of digital securities, but alerts that “the payment mechanics of the ATS are novel and untested.”
The distributed ledger made use of to tape-record transfers of ownership of digital securities, represented by ledger balances and protected by cryptographic key pairs, will be readily available to the general public and shop the complete trading histories.
The ATS will not utilize a Bitcoin wallet strategy where the cryptographic secrets are regulated by the user– at least not initially– however a centralized crucial management scheme much like that used by “Bitcoin banks” such as Circle. Initially, either the ATS itself or each broker-dealer participating on that ATS would hold the personal keys on behalf of securities holders.
This central or semi-centralized model, which may look like a step back from the decentralized blockchain, is justified due to the fact that it will certainly allow securities holders to manage their digital securities account with an easy login and password, much like conventional online brokerage accounts.
Using the word “initially,” however, suggests that Overstock might execute a more decentralized design in a second stage. Customer defense versus dishonest brokers will certainly be supplied by multisig: “There can be several private keys, any number of which might be required in order to license a transfer of ownership of the digital securities,” notes the filing.
The post Overstock Files Crypto Stock Exchange Prospectus with the SEC appeared first on Bitcoin Magazine.