Crypto Industry

Goldman Sachs-Backed Firm Acquires Crypto Startup to Issue Tokenized Securities

Cole Petersen | October 6, 2018 | 6:50 am
Crypto

Goldman Sachs-Backed Firm Acquires Crypto Startup to Issue Tokenized Securities

Cole Petersen | October 6, 2018 | 6:50 am

Circle Internet Financial, one of the markets most well-known and well-funded crypto startups is acquiring crowdfunding firm SeedInvest in order to make it easier for startups to issue digital coins and to allow its customers to trade a greater variety of digital tokens.

Major Development in Tokenized Securities

SeedInvest was founded in 2012, and is a unique platform that allows investors, from anywhere in the world, to invest in startup companies, an ability that is typically reserved for wealthy investors who meet specific requirements set forth by global regulatory agencies.

Despite increased accessibility to unique private fundraising opportunities, many SeedInvest projects do have specific investor requirements, mainly due to the regulations incurred by being incorporated under a registered broker-dealer with the US SEC.

If approved by regulators, the acquisition of SeedInvest by Circle would offer the crypto markets a new investment opportunity: investing in companies through the issuance of regulated security tokens that would entail investors to specific rights as set forth by the company.

It would also prove incredibly helpful to companies that are looking to use a tokenization model to reach a wider investor audience and to avoid the challenges posed by traditional share-based fundraising models that require heavy banking presence.

Circle’s CEO, Jeremy Allaire, spoke about his company’s latest acquisition, saying:

“This was a company who had been at the forefront of collaborating with government to figure out how to make it possible to innovate in the way people raise capital. Crypto securities are going to become a major new category of securities that ultimately every business is going to adopt, just like every business has a website.”

Many investors and companies have been wary of token issuances that resemble securities, mainly due to the regulatory risks associated with them. The introduction of a fully regulated investment platform, like SeedInvest, however, would alleviate these concerns and provide a fully regulated venue for prospective security token investors.

Circle is not Alone: Growing Trend of Cryptocurrency Exchanges Acquiring Registered Broker-Dealers

Cryptocurrency exchange Coinbase has also taken similar actions to acquire registered broker-dealers in order to legally list, and sell, cryptocurrencies and tokens that are deemed as being securities by the US Securities and Exchange Commission.

The exchange’s recent acquisition of Keystone Capital, Venovate Marketplace, and Digital Wealth, all help this goal, enabling compliance with securities laws set forth by the SEC and FINRA.

Asiff Hirji, the President and COO of Coinbase recently wrote about the exchange’s acquisitions, saying:

“Today, we’re announcing that Coinbase is on track to operate a regulated broker-dealer, pending approval by federal authorities. If approved, Coinbase will soon be capable of offering blockchain-based securities, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)… This is all being enabled by our acquisition of Keystone Capital Corp., Venovate Marketplace, Inc., and Digital Wealth LLC.”

Circle and Coinbase are both working towards a similar goal of profiting from the growing trend of tokenization, which could very well alter the way money is raised in the 21st century.

“It’s not just ‘how do we let companies do ICOs?’ It’s ‘how do we support the tokenization of everything?’” Allaire added.

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