From Research to Use-Case: How 8 Decimal Capital Strategically Constructs Its Security Token Landscape
8 Decimal Capital8 Decimal Capital Overview: The evolution of digital tokens has coincided with a great deal of risk from being in the financial market ecosystem. But in the future with the development of RegTech, a compliance layer will be created to automatically ensure KYC/AML along with other compliance requirements. Then, the cross-border regulatory synergies will be likely to emerge. Although the Security Token industry is currently still in its nascent stage, many organizations and companies are debating how this new technology can be used. However, by investing early-on, investors can help to accelerate this process and help the industry maximize its potential. In the future, financial agents and regulatory agents will still exist. But the funds in the industry will provide more than just capital and there are more roles for them to fill.
Writer: Ran Wei
Translator: Zoe Qian
Editor: Brian Hough
8 Decimal Capital predicts that the tokenization of assets will likely catalyze future adoption of cryptocurrencies and blockchain technology. With the development of this new technology, the regulations of different countries will be programmed into tokens, and regulatory collaboration between countries will also occur.
This digital transformation is why 8 Decimal Capital is bullish on the Security Token space and investing across different segments of the market to help the industry grow.The Development of Security TokensOverview
The tokenization of securities will likely take place among more diverse types of assets. Some of these assets include mixtures of stocks and bonds, dividend rights, and non-traditional financial assets, such as real estate and art, which used to be difficult to trade.
The evolution of digital tokens has coincided with a great deal of risk from being in the financial market ecosystem. This proves why more regulations must be built at the protocol level. But in the future with the development of RegTech, a compliance layer will be created to automatically ensure KYC/AML (Know Your Customer / Anti-Money Laundering) along with other compliance requirements. Then, the cross-border regulatory synergies will be likely to emerge.
In China, the typical investor is familiar with public funding, IPOs and stocks. However, they are not used to, nor ever get the chance to, invest in the larger and more diverse market of private funding, private equity, debt, and alternative investments. Once the market is open to more participation from investors, then the liquidity of trade will provide investors with more opportunities to diversify their portfolios.
Some people would argue that by mandating the KYC process for every investor and requiring only accredited investors in the game would initially raise the bar for participation and in turn lower the liquidity of cryptocurrency. 8 Decimal Capital will argue that this is not the case.
The size of the U.S.’s private equity market is 22 times larger than the public market. Through being more compliant and including more institutional investors, the cryptocurrency market is opening up to an expanding market instead of a shrinking one.
As PwC and Securitize highlight in the graph above, private funding (in billions) is 22x larger for private offerings thanIPOs.
Although the Security Token industry is currently still in its nascent stage, many organizations and companies are debating over how this new technology can be used. However, by investing early-on, 8 Decimal can accelerate this process and help the industry maximize its potential.The Security Token Offering Process and the Main Platforms
The Security Token industry includes distribution platforms and rating agencies, payment platforms and stable currencies, exchanges, KYC, consulting services companies, and liquidity providers, among many others. The most important participants are the projects, the distribution platforms, and the ST exchanges.
At 8 Decimal Capital, we believe a successful Security Token Offering (STO) requires a legitimate company to launch a compliant Security Token, which will be traded by whitelisted investors on compliant exchanges.Industry Segments Issuers Issuance Platform Investment Banks Smart Contracts to Track Spending and Revenue Payment Platform and Stable Coin Investing Exchange KYC/AML Governance Platform SaaS (Software-As-A-Service) Platform to Allow Investors to Vote Help with Company Charter Agencies Custodian Liquidity Providers Media/PR Agencies Rating Agencies Compliance, Law & Accounting Information Platforms Admin Consoles
Moving from Pre-STO to Issuance (release) to lifecycle-management (full process management), we are finding the best projects that deliver the required services and invest in them.Beyond Capital 1.) Legal ― Partnership with TackettBartlett
Regulation drives innovation locally and globally. Within the global market, various “blockchain friendly” countries have emerged which boast government encouragement of blockchain and cryptocurrencies, while other “blockchain unfriendly” countries have more regulations for companies and projects to pass through before reaching the public. For example, the United States has exemptions Reg D, Reg A+, Reg S, and Singapore MAS also has similar regulations that require specialized efforts to remain compliant. Companies in China that want to conduct STO may need to set up VIE architecture.
Under Section 5 of the Securities Act of 1933, all offers and sales of securities must be registered with the U.S. Securities and Exchange Commission or qualify for an exemption: Regulation D, Regulation A+, Regulation S, and Regulation CF.
In terms of legal services, 8 Decimal Capital is partnering with firms, such as Tackett Bartlett LLP, which is experienced in the cryptocurrency space. For example, Berkley Vice Mayor, Ben Bartlett , is an advisor to 8 Decimal Capital. He is also a strong supporter of the blockchain field and an advocate for the concept of Crypto Municipal Bonds.
Ben Bartlett , Berkeley’s Vice Mayor and an Investment Partner at Octavia Capital, believes in the future of blockchain and the concept of Crypto Municipal Bonds. Ben Bartlett and Shane Tackett co-founded Tackett Bartlett LLP which