Developers: In partnership with the good folks at Lannister Development, we have now released an open-source framework for Equity Tokens. Download the Equity Token framework here, and let us know how it works for your blockchain project!
One of the most hotly contested issues in the blockchain space is regulation. Confusion and ambivalence among investors and a lack of clear direction from regulatory agencies constitute an impediment to blockchain’s ability to flourish.
Bitcoin Market Journal’s publisher, John Hargrave, believes there’s a solution for that. It’s equity tokens. Here’s a 3-minute video that explains the concept:
Understanding ICOs and Token Types
New tokens are typically sold in initial coin offerings (ICOs), crowdsale events in which a company or a platform seeks seed or first round founding, like an IPO.
There are three basic types of tokens: coins, or currency-type tokens, which are tokens whose primary function is to serve as digital money; utility tokens, which serve as the medium or “coupon” for the blockchain’s service or platform, entitling the holder to that service; and security tokens, which function somewhat like a traditional security asset.
- ICO Regulations by Country
- ICO Tokens 101: Understanding Token Types
- Here’s Why the Coins vs. Tokens Debate Matters to the SEC…and Investors
The Equity Token: A Path Forward
An equity token is a type of security token. A recent Bitcoin Market Journal working paper for the Financial Industry Regulatory Authority (FINRA) explains how equity tokens work on the blockchain, stating:
“The equity token functions just like a traditional security. The blockchain management team offers the token to the public in a crowdfunding event, as a Regulation CF or Regulation A exempt offering. The resulting token functions just like a share of stock, but recorded on the blockchain and traded on equity token exchanges.”
Equity tokens are typically offered via an early seed round, a public offering of the token and public listing of the token on token exchanges. When working as intended, this system will:
- allow investors to invest in blockchain companies while staying in compliance with securities laws.
- allow entrepreneurs a model for funding new offerings.
- will allow regulators a framework for evaluating token offerings.
For instant access to your own free copy of Bitcoin Market Journal’s working paper for FINRA, simply fill out the form below:
Smoothing the Path for Blockchain Growth
As the FINRA paper points out, for the equity token model to work, three moving parts of the process must be in place.
- Investors must have ready access to reliable information about ICOs.
- There must be trustworthy and knowledgeable brokers-dealers available to identify and sell these securities to qualified investors.
- There must be crowdfunding platforms that can cater to both retail and institutional investors while maintaining Know Your Customer/Anti-Money Laundering compliance.
The first step for investors is to find a reliable, unbiased source of information on ICOs and blockchain topics, a knowledgeable partner that can keep you advised with insights on various token offerings, including equity tokens. Bitcoin Market Journal is a proven source for data on all things ICO and blockchain. Subscribe to the Bitcoin Market Journal newsletter today and join thousands of investors who are conducting their own due diligence with the help of our team of skilled, unbiased analysts.