Recently, the US Securities and Exchange Commission announced that they have approved the plans of Overstock to issue stock via the blockchain through its tO platform.
Wired published an article that stated, “Public documents by Overstock show that the SEC has approved an amended Form S-3 that would allow the company to issue public securities via blockchain – based technology.”
This is the first- of- its- kind approval from the regulatory authority that might completely alter the way how public securities are issued and traded in the future.
The chief executive officer of Overstock, Patrick Byrne did not confirm as to when the public securities were issued, but he stated, “You can assume its high on our list of priorities for 2016.”
Overstock has developed its technology under the aegis of a subsidiary known as TO.com. The company plans to offer this “crypto security” technology as a service to other businesses in order to enable them to issue stock via the blockchain.
Each business would need to separates approval from the SEC, but Overstock could use the system to issue stock or a third- party before issuing its own.
Jeffery Steiner, a lawyer at Gibson Dunn who specializes in blockchain technology, explained that the project of Overstock demonstrates what the blockchain can do for capital markets.
He stated that it can ensure transaction security and provide a complete ownership record for the stocks.
The blockchain technology can reduce the costs, eliminate middlemen that include a traditional exchange or a broker, and improve transparency.
Steiner further stated that the project of Overstock is interesting, but regulatory issues can be problematic since there is no precedent. Investors may be wary of the technology.
But he acknowledged the financial industry’s growing interest in the blockchain indicates attitudes are changing.
The technology is designed to provide a secure, transparent, reliable, and largely automatic way of tracking who owns a given security at any given time.
This technology could replace systems run by the New York and Nasdaq stock exchanges.
Byrne further stated, “There are all kinds of ways to rig the market. We want to make it un- rig able.”
On August 2015, Overstock has sold a $5 million worth of “crypto bond” to FNY Managed Accounts, a New York- based trading firm.
This project was first announced in April 2015 and again later in June. Overstock announced at that time that it plans to offer $25 million private bond using blockchain.