Overstock, a publicly traded company managed by maverick CEO Patrick Byrne, has received SEC approval to regarding a plan to issues shares using Bitcoin Blockchain. According to a filing with the SEC, the use of the “technology and distributed ledger technology by the Pro Securities ATS is novel and untested with respect to digital securities”;
“Our digital securities will be traded on a novel, untested system developed by the Pro Securities ATS specifically for trading digital securities. This novel trading system is subject to all the usual risks associated with the fact it is new and untested, including:
a rapidly-evolving regulatory landscape, which might include security, privacy or other regulatory concerns that could require the Pro Securities ATS to implement changes to its digital securities trading system that could disrupt trading in our digital securities…”
Overstock has already used Blockchain in a private bond offering earlier this year.
An article in Wired explained that Byrne sees Blockchain as disrupting capital markets;
“…it could replace systems run by the New York and Nasdaq stock exchanges. Such a system could eliminate many of the middlemen who have traditionally controlled the market, and thanks to its technological precision, it could close certain market loopholes. There are all kinds of ways to rig the market … We want to make it un-rig-able.”
The Overstock CEO initiated a bit of a crusade against financial firms several years back when he claimed some firms were naked shorting Overstock shares. Shorting shares without providing the actual shares can balloon share supply thus depressing share price. Naked shorting has been an issue on Wall Street for many years as firms would consistently fail to deliver the shares. Using the Blockchain ledger-based system may be a bit of a payback by Byrne. Of course, traditional financial firms are not sitting still. All sorts of financial firms are investigating the use of cryptocurrencies and Blockchain technology – including well-established stock exchanges.
Jeffrey Steiner, an attorney who specializes in Blockchain tech, is also quoted in the Wired article explaining
“It [blockchain] can not only ensure that there’s security in the transaction, but it provides a full record of ownership for things like corporate bonds and stocks. It can increase transparency, reduce costs, and remove the middleman—in this case remove a [traditional] exchange or a broker.”
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