Capital Markets Firsts for Blockchain Include Bonds, Security Tokens, Exchange Traded Notes
By: Jaime B. Petenko
According to an Aug. 10, 2018, press release, the World Bank and an Australian multinational bank are partnering to issue what is reported to be the first bond globally created, allocated, transferred and managed over blockchain. The “Blockchain Offered New Debt Instrument,” or “bond-i,” will be issued over a private blockchain built on top of the Ethereum network that has been reviewed by a major global technology company for its architecture, security and resilience. The blockchain platform will be co-hosted by the World Bank in Washington, D.C., and the Australian multinational bank in Sydney, Australia.
In another first, a token trading platform operating as an SEC- and FINRA-registered broker-dealer and alternative trading system recently launched a Reg D 506(c) offering of security tokens issued by a popular Colorado resort. Accredited investors can purchase “Aspen coins,” which represent, indirectly, one share of common stock in the Colorado resort, including voting rights and rights to distributions. The Aspen coins are backed by the resort’s assets. Purchases of Aspen coins can be made with U.S. dollars, bitcoin or Ethereum. In Canada, a Canadian multinational bank and the Ontario Teachers’ Pension Plan announced the successful issuance of a fixed income transaction on blockchain. The Canadian bank sold CA$250 million of one-year floating rate deposit notes to the pension fund and mirrored the transaction on a blockchain platform.
According to reports, this week an exchange-traded note that has been trading on the Nasdaq Stockholm Exchange since 2015 is now being quoted in U.S. dollars. Trading the note will be similar to buying American depositary receipts, where investors will see a foreign-listed asset in U.S. dollars. Trades will be executed in U.S. dollars but will be settled, cleared and held in custody in Sweden.
Two foreign stock exchanges also made announcements about trading digital assets this week. The Stuttgart Stock Exchange (Gruppe Börse Stuttgart), the second-largest stock exchange in Germany, announced it is creating an end-to-end infrastructure for digital assets, to include cryptocurrency trading, initial coin offerings and a cryptocurrency custody service. And the Jamaica Stock Exchange (JSE) signed a memorandum of understanding with a Toronto-based fintech company to create a digital assets trading platform that meets regulatory compliance standards. The JSE plans to include regulatory tools on the platform, including a tool to track market manipulation. Also this week, the prominent industry organization Coin Center released a report setting forth a proposed framework for securities regulation of cryptographic assets, cryptocurrencies and tokens.
To read more about blockchain developments in capital markets, see the following:
Cryptocurrency Cybercrimes and Enforcement Actions Continue
By: Brian P. Bartish
New statistics from Kaspersky Labs show that phishing schemes exploiting ICOs to target potential investors have generated more than $2.3 million in the second quarter of 2018 alone. According to a recent survey of UK organizations, one in three respondents had been impacted by cryptojacking malware in the past month. In a recently filed lawsuit, fraudsters allegedly impersonated a victim in communications to a multinational telecommunications company to access the victim’s crypto wallets and steal $24 million in cryptocurrencies. According to another recent report, a wealthy investor was flown to Macau by a Thai group in a scheme that resulted in the theft of more than 5,500 bitcoins.
On Aug. 11, alleged stablecoin provider Tether issued new Tether tokens worth $50 million after losing roughly $300 million in market capitalization over the past 30 days. Tether has been the source of criticism for its failure to submit to a public audit to prove its claims of Tether being backed by the dollar on a one-to-one basis.
In a speech last week, FinCEN director Kenneth A. Blanco delivered a clear, stern message to crypto exchanges on their AML and CFT obligations, stating that compliance programs must be implemented long before they receive notice of an examination. Mr. Blanco stated that FinCEN’s goal is to ensure that all virtual currency money transmitters undergo such compliance examinations regularly. And in an Aug. 14 press release, the SEC announced that it had obtained permanent officer-and-director and penny stock bars against the founder of a company who perpetrated a fraudulent ICO.
For further reading:
Blockchain Investment Continues as Businesses Expand Operations
By: Simone O. Otenaike
Earlier this week, a U.S. Securities and Exchange Commission filing revealed that a leading blockchain investment company has raised more than $71 million from approximately 90 investors for its third crypto fund. The same blockchain investment company raised $13 million for its crypto fund in 2016 and $25 million for its initial coin offering fund in 2017. In related news, two portfolio companies from a major online retailer’s crypto fund made key announcements. The first portfolio company, which raised $134 million in a security token offering, revealed that a Hong Kong-based equity firm agreed to invest an additional $400 million in the company in exchange for equity. The other portfolio company, a Barbados-based blockchain startup, announced plans to partner with a Caribbean-based bank to issue a central bank-backed digital currency and test know-your-customer/anti-money laundering technology.
In Singapore, a venture capital firm announced plans to launch a $10 million crypto fund. According to The New York Times, this fund will invest in early-stage companies globally such as cryptocurrency exchanges and security providers. Meanwhile, a New York-based blockchain company recently completed a $32 million Series B funding round and announced plans to expand its user base and further develop its auditable distributed ledger-based network, data synchronization technology and Ethereum-compatible smart contracting language.
This week Coinbase announced its acquisition of a decentralized identity solution startup company. The company will join Coinbase’s identity team and intends to use blockchain technology to develop new and innovative ways of verifying and validating identity. Also this week, a leading mobile payment platform announced the expansion of its service to allow customers to buy and sell bitcoins in all 50 U.S. states.
To read more about the topics covered in this week’s post, see the following:
