The Securities and Exchange Commission Approves Blockchain-based Securities by Overstock
U.S. Securities and Exchange Commission has approved the application from Patrick Byrne’s renowned company Overstock to issue its securities online via a blockchain-based technology. This might be an evidence of a substantial paradigm shift for the authorities’ stance as to anything related to crypto-space.
According to the documents available to the general public, Overstock’s filing incorporated so-called Form S-3, a form for securities registration applied to companies operating in compliance with the Securities Exchange Act. It is a simplified version of more fundamental Form S-1, which, according to the commission’s conditions, is required for holding an IPO.
Overstock.com has been known for a while for their CEO’s outstanding interest in cryptotechnologies. Mr. Byrne also co-founded a company T0.com, which mostly provides business-to-business services of issuing various securities via blockchain, provided there is an approval obtained from the SEC. Overstock.com will use T0’s services to issue its own electronic securities.
The relevant application was filed this spring, and the first unconfirmed reports as to its approval started circulating last week. Now Overstock confirms that eight month later it can at last proceed with implementing its plans. Currently there is no information concerning the exact date of the issuing, however, Mr. Byrne told Wired it was on the company’s list of priorities of 2016.
One of the greatest advantages of ‘blockchain-based trading’ is a substantial decrease of delays: currently, trades employ the settlement mechanism of T+3, which means that the settlement occurs three days after the trade; however, the blockchain technology allows for almost instantaneous settlement, thus making trade and settlement generally the same thing.
T0’s technology employs the concept of colored coins. Overstock’s idea is in creating shares beyond control of any central exchange entity like NASDAQ or NYSE. The control is performed with several distributed computers, which no entity is able to control. Cryptographic algorithms allow for mathematical verification of trades and recording them in an online ledger available for audit at any time.
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