Katipult, a software provider for the investment crowdfunding space, is currently in the process of creating a distribution application (DApp) that will support secondary market transactions for private securities. Crowdfunding under Reg D, Reg A+ and Reg CF (and other exemptions in other markets), creates an interesting opportunity to provide liquidity in a currently ill-liquid market.
There has been a lot of discussion regarding providing liquidity for investors in these new assets with various marketplaces like NASDAQ, TSX, OTC Markets and NYSE each looking to enter the space in various ways. Katipult, for its part, will be using Blockchain or Distributed Ledger Technology (DLT) to create a secondary market and make it available for existing and future clients.
For large corporations currently in the market, trust and security are of the utmost importance. Katipult plans to use Blockchain because it is structured with the intent of being unbreakable and thus extremely trustworthy. Katipult says the implementation of this technology will provide them with unrivaled customer security.
Katipult is currently planning on building this new function using the Ethereum platform, but are remaining flexible as they seek the right technology for their Fintech model.
In a blog post, Katipult CTO Doug McClean, described how they will use blockchain technology:
“When an offering is closed that will be secondary market eligible, a BlockChain token will be created that represents this security. An initial placement will occur where the Investor has the shares injected into their chosen Ethereum wallet (no this doesn’t involve any mining or anything complicated). The investor will be able to see their balance either through their Ethereum wallet or through the Katipult system. Using the Katipult platform, an investor will be able to make a bid on a security or will be able to sell a security. There will be a list of which trades are available, and the investor can choose to change his bid or sell price in order to make the transaction.”
The Katipult system will work alongside the Blockchain, providing it with exchange reports. The system will be updated with transaction information and the Blockchain will track the exchange itself.
Katipult plans to track exchange information in a conventional database in addition to the new Blockchain, thus ensuring that the data is valid. This will allow them to check and make sure that the new technology is functioning properly.
If Katipulit can create an effective secondary market that is distributed and provides sufficient liquidity to empower platforms to trade in new securities it will be quite an accomplishment.
The company says they have received inquiries over the past couple of years about using Bitcoin or other digital currencies over their primary market function, however no client has truly pursued the option. They also note there are regulatory questions to incorporating cryptocurrencies as the sector is clearly evolving and a bit fluid.
Katipult currently possesses ten different payment gateways across the world, and its growing. They claim that if they receive significant interest in the use of cryptocurrencies that they will further purse the option.