As Some Firms Defy SEC, Overstock Is Set To Cash In On "Wild West" ICOs

Tyler Durden's picture

The Securities and Exchange Commission roiled the blockchain industry last week when it announced that so-called Initial Coin Offerings are considered securities offerings. While some firms are embracing a strategy of open defiance, vowing to push ahead with their planned ICOs without registering them, at least one former innovator in the blockchain arena sees the new rulings as a boon for its nascent cryptoasset trading platform, according to CoinDesk.

Overstock.com, one of the first major US companies to embrace blockchain technology, believes the regulations could drive business to its cryptoasset trading platform known as T-0. Overstock cemented its status as a blockchain innovator back in December 2015 when it raised $2 million by offering a small tranche of Overstock corporate bonds on its platform. The offering, which received approval from regulators, created the first blockchain-based financial securities to trade in the US.

Overstock CEO Patrick Byrne

Since then, the company has been quietly building out its platform while waiting for US regulators to create a framework for legally offering and trading blockchain securities. And now the day it has long been waiting for has finally arrived, according to CoinDesk.

…earlier this week, tØ got the news it had been waiting for when the SEC finally published the results of a landmark report in which it clearly laid out its rationale for why some tokens are still securities.

 

Moreover, the report clarified that, once a token issued in an ICO has been deemed a security, only national securities exchanges like Nasdaq and some alternative trading systems (ATSs) are permitted to be involved in the trading.”

Overstock.com started building its T-0 blockchain-based trading platform in the spring of 2015, when it purchased a stake in an alternative trading system. Now, the company believes its system is ready for the mass market, and hopes to receive permission from the SEC to traffic in ICOs in the coming months.

“Moreover, the report clarified that, once a token issued in an ICO has been deemed a security, only national securities exchanges like Nasdaq and some alternative trading systems (ATSs) are permitted to be involved in the trading.”    

According to CoinDesk, Overstock CEO Patrick Byrne has long hoped to build a platform that would allow trading in stocks and bonds backed by the blockchain. The platform’s name, T-0, is derived from Byrne’s claim that blockchain-backed transactions are inherently superior to the current system because, in theory, these trades will settle instantly, instead of taking up to three days to clear.

However, many competitors, including some of the world’s largest financial institutions, are quickly catching. Earlier this month, Goldman Sachs was awarded a patent for its own crypto trading system called “SETLCoin.”  

Those who are only now becoming acquainted with Byrne’s story might wonder: What inspired a guy who built a billion-dollar business selling furniture and other household goods to try and revolutionize how financial securities are traded?

Byrne was initially inspired to try and disrupt the world of high finance after Overstock was nearly destroyed by “naked” short sellers, or speculators who sell a company’s shares short without first procuring the securities. The incident inspired Byrne to use the blockchain to cut out everyone who stood in the way of buyers and sellers, as CoinDesk explains.
Still, the question of whether it’s legal to trade blockchain-based stocks and bonds remains murky. However, there’s been at least one important breakthrough recently. Last month, the Delaware legislature passed a landmark amendment that opened the door to blockchain-backed stock trading on a massive scale – a decision that could significantly impact Overstock’s business.

“One possible explanation for the relatively few compliant blockchain capital raises is uncertainty about the legality of recording stock ownership on a distributed ledger, according to Andrea Tinianow, founder and director of the state-run Delaware Blockchain Initiative.

 

Using technology that tØ's parent company invested in last week, made by New York-based Symbiont, Delaware has just signed into law a series of amendments that Tinianow has said will remove much of that uncertainly for firms incorporated in her state.

 

"We've got the regulatory framework for blockchain shares," said Tinianow. "Now the SEC is coming in with federal guidance and it’s a natural fit."

In another major regulatory accomplishment, the Commodity Futures Trading Commission recently approved the creation of the first clearinghouse for cryptocurrency options, a decision that could entice sophisticated investors like hedge funds and CTAs to increase their exposure to bitcoin, as we reported earlier this month.

US regulators aren’t yet comfortable with bitcoin ETFs (although a quad-levered S&P ETF is just fine for mom and pop), but apparently options and swaps are another story. This week, the CFTC took a bold step forward in terms of granting institutional investors access to the bitcoin market, approving the creation of the first SEF or Swap Execution Facility. Previously, traders who wished to place bets in bitcoin derivatives markets were forced to operate in markets that were strictly OTC. But now the agency has issued a registration order to LedgerX, granting it status with the CFTC as a Swap Execution Facility, in the process approving bitcoin options trading.”

While Overstock has a long history of working with regulators, some companies are effectively choosing to rebel against the SEC’s ruling that all ICOs marketed in the US must be registered, according to Reuters.

“Technology companies looking to raise money by issuing digital coins are moving forward with their plans despite a U.S. regulator's decision that their offerings may be subject to tough securities laws.

 

On Tuesday, the SEC decided that tokens issued through the ICOs can be considered securities, meaning they would fall under laws that require disclosures and are subject to regulatory scrutiny to protect investors, unless a "valid exemption" applies.

 

Some industry participants and analysts had thought such a decision would have a chilling effect on the ICO market. But 20 new ICOs were announced since the SEC's decision, with more than 120 scheduled to launch this year, according to ICO tracker tokendata.io.

 

Representatives of Rivetz and ICOBox, which plan to launch tokens over the next few weeks, told Reuters they are pushing through with their offerings.”

According to Reuters, ICOs have raised more than $1 billion in capital this year as companies launched more than 900 new coins.

"We were kind of annoyed when these ICOs started taking off. They weren't getting approval, it was the Wild West. We thought long and hard about doing our own ICO ... But we held off, going down the regulatory road," T-0 President Joseph Cammarata told CoinDesk.

ICOs are similar in principal to stock offerings in that investors bid up the price of tokens associated with companies they believe will grow profits. However, the paucity of information about many of these companies – some of which have been unmitigated frauds that essentially took investors’ money and ran - makes valuing them nearly impossible.

Hackers have plagued the cryptocurrency investment community since its early days, so it’s little surprise that they’re already started looting ICOs – a security problem that could potentially drive more customers to OverStock’s platform if it can provide enhanced security. As we reported earlier this month, hackers stole $7 million in investors’ funds from CoinDash, a blockchain startup focusing on "cryptocurrency social trading and portfolio management platforms.” Bloomberg notes that hackers have stolen more than $40 million from ICOs.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Raffie's picture

They also been buying PM as well. Smart man to have cryptos with the PM.

Interesting company.

38BWD22's picture

 

 

Yeah, indeed, an interesting company and an interesting man.

Au and BTC.  Great alternatives, great diversifications.

Ghost of PartysOver's picture

I think this whole bitcoin thing is going to go down the same path as the Dot Com era.  A big crash out then reality sets in.  Ad as we all know there are a bunch of Dot Com's today that are changing the world.   After the blow up, if I haven't gone toes up by then, I will be interested. 

RAT005's picture

Since cryptos generally appeal to the independent side of the crowd, I don't understand how easily they are confused with money.  They are currency with value based on trust that they won't be rehypothicated or conterfeited via mass printing.  Silver and gold are money.  So a gold/silver backed crypto is a fun idea, but without backing, the cryptos are a train wreck looking for a weak bridge.

Shitonya Serfs's picture

I am guessing these cryptos are Fed/IMF controlled. Not that they started them, but that they have captured them and plan to use them as their next level of monetary control. And, of course, it's even better that this will be done by our choice (not forced upon us by them).

HillaryOdor's picture

I hate it when people say wild west like it's a bad thing. 

The wild west was probably the closest America ever got to an AnCap true libertarian society.  I would kill to live in a place like that, especially with modern technology.

Ink Pusher's picture

Reminder:

Free Market Capitalism nor the allusion to the  Wild West have any relation to partisan  libertarian-ism eh !

Nobody For President's picture

Welcome to Humboldt County, Northern California.

BadLibertarian's picture

Yep, we get it. Horseless carriages only make sense if you tow a horse around with them as a backup - just in case the gasoline goes out. Also, something, something, tulips.

Thanks!

Golden Phoenix's picture

The point of a blockchain is the removal of counterparty risk. Linking a crypto to gold/silver reintroduces counterparty risk. One must take someone's word the metal was ever in the warehouse and no one has driven away with it. According to some reports Fort Knox is empty.

If you think a gold/silver backed crypto is a good idea then you don't understand cryptocurrency at all. 

GoldVu's picture

I disagree about the counterparty risk of a gold & silver backed digital currency.

Weaknesses in any system will always show - a fine example is why is there a Classic Ethereum?

In real life it is not possible to ever eliminate all risk - not matter how much a snowflake dreams it to be so.

It all comes down to the strength of internal controls, checks & balances and external & independent audits. The reason why Fort Knox is empty is because it has no control or checks - same for the GLD.

If you look at BullionCoin (http://www.goldvu.com/bullioncoin.html), it is a digital currency 100% backed by vaulted gold & silver on a 1:1 basis. All holders of BullionCoins can redeem their coins to have the gold / silver physically sent to them.

Everyone reading ZeroHedge should know by now that in today's digital age, there is no such thing as anonymity online - unless you go to some extreme lengths beyond the ability of most. Furthermore, there is nothing private about blockchain. However, BullionCoin gives you back control over your privacy and anonymity because of the ability to have the physical delivered to you.

The convenience of a digital currency is great for 99% of international or local coffee shop transactions (it takes just 4 seconds to confirm), but where you want to make a transaction and retain total privacy over it from the government, have your BullionCoins delivered to you and perform your transaction that way. You just can't do that with any other cryptocurrency

I'd say it seems it's you that doesn't wholly understand cryptcurrencies. They aren't private, they aren't anonymous and they can be just as flawed as anything else.

I would far rather take a cryprocurrency that allows me to have Real Money to be delivered to my home to use privately off-line than use something like Bitcoin that permanently keeps you in the government spotlight which also holds zero value in the off-line world.

Bunga Bunga's picture

Most altcoins are already crashing, but Bitcoin is close to a new ATH.

HRClinton's picture

A smart and shrewd person will invest in a mix of...

RE, Cash, PM, Crypto and some stocks & bonds.

As a prerequisite they will also invest in a quality education, lifestyle and relationships. 

Brains + Quality in, good Results out.

GlassHouse101's picture

Who's going to be the 'Netscape' of Crypto's? 

38BWD22's picture

 

 

Mmm.  We may not have to wait too long to find out.  After August 1, things may get interesting again in Cryptolandia.

Can we sell BCC (not BTC) short yet?

HRClinton's picture

It should be ZH, but it won't be.

The Tylers are too comfy with their Cottage Industry biz model.

JFK's picture

I am missing something or are ICO's basically the same as Canadian Tire money?

HRClinton's picture

Americans don't realize it appreciate that Canadian Tire money is one of Canada's finest inventions. 

opport.knocks's picture

Canadian Tire money is great after it went digital and you got real money on ALL your Mastercard purchases. Before that it was a PITA.

It is easier to use than any ICO for sure. But it has no speculative value for the people who like to make money by doing nothing.

bluskyes's picture

Nope, I can buy a brand new ratchet set in 10 minutes with Canadian Tire money.

With Bitcoin, I have to wait many hours for the payment to confirm.

rejected's picture

If you don't hold it you don't own it.

As a long time programmer I have yet been able to 'hold or touch' a bit or byte.

Good luck to you cryptos!

tmosley's picture

According to crypto haters, you do nothing all day.

GodSpeed_00's picture

If you want to hold it then print out your keys on a piece of paper. If you work a job to earn USD then you can't hold that either. It's all electronic digits on a bank ledger, bit and byte as you say.

Bunga Bunga's picture

I can hold a fart in my hand. So what?

Justin Case's picture

Next best thing is a shart.

VIS MAIOR's picture

go back pray to bitcointalk. )))     its just ponzi where lucky hodlers now feel rich but if they start selling to fiat - exchanges will go to bancrupt ))

so they are just hypotheticaly rich ))) 

 

HRH Feant2's picture

Except for .05 BTC my account is now cash. I will be back, trading, after Aug. 1st.

dark pools of soros's picture

get big and kick amazon and wall street in the nuts

Ink Pusher's picture

~ Impending blockchain hardfork on August 1 .

" There is a deadline on August 1st when a BCC chain is due to fork off and another deadline on August 23 when SegWit is supposed to officially activate. Of course, knowing Bitcoin, anything could happen between now and then."

https://www.deepdotweb.com/2017/07/28/bitcoin-price-analysis-28-july-201...

Exponere Mendaces's picture

All the (g)oldfags are waiting for August 1st like its their promised land.

Sorry fossils, Bitcoin will still be around. Nobody is concerned about some alt-coin bullshit.

Overstock has been a true innovator in the crypto space. They deserve more credit than what they currently get. At least he proves that some older people aren't completely clueless retards when it comes to new ideas.

Justin Case's picture

The Edsel & Mizar Flying Car were new ideas too.

I_rikey_lice's picture

"Overstock has been a true innovator in the crypto space"

 

Overstock's share price has done nothing over the last 15 years while Nasdaq is at all time highs. Worst investment than silver even.

Schmuck Raker's picture

Reggie Middleton is a principle at Veritaseum. Their token was hacked recently for a couple million dollars. To compesate those that lost funds, they will issue tokens to the victims.

So much for immutability, etc. Oh, how the mighty have fallen.

Dragon HAwk's picture

New World Crypto, will be the only Cryto allowed,   or All Crytos will be allowed and the market will sort them out..

  it's sort of like the argument, we are the only intelligent life in the universe or we aren't. Both are scary thoughts

Abaco's picture

Glad to see some of these guys defying the SEC.  There is no lawful basis for the existance of the SEC and everyone should flip those useless cocksuckers the bird.

wattie's picture

ATTENTION GOLD AND SILVER INVESTORS!!

A brand new institutional grade precious metals backed crypto currency is about to be launched. 

This new gold/silver standard in crypto will offer gold/silver investors a yield, security and confidentiality. 

You can also choose to take delivery of your metal should you desire to!

Register here for information

www.ownbullioncoin.com

 

www.ownbullioncoins.com

seataka's picture

 

"Bitcoin's power usage is on the order of the entire power consumption of Ireland" "Even if bitcoin could replace conventional currencies it would be an ecological disaster"


Want to understand Bitcoin, Etherium & blockchains? READ THIS GUY'S BOOK I've known him for 25 years, you will not do better... I trust him and his judgement. Another of the real old guard of the alt.scientology.war Arnie Lerma.