Polymath went live Thursday with a system that will migrate securities to the blockchain by creating tokens that offer partial or complete ownership of real assets.
Unlike utility tokens, which allow holders access to blockchain-based products and services, Polymath’s security tokens will backed by a company, real estate or other real assets. Polymath says its launch will pave the way for security token offerings (STOs) that would act much like a blockchain-based version of an initial public offering (IPO), with a token’s worth depending on the value of the asset backing it.
“For an STO to be successful, it takes an ecosystem and that ecosystem has to work in unison,” said Polymath’s Thomas Borrel.
The company says its system has features that ensure only authorized investors can participate and that satisfy regulatory requirements.
From Cannabis to Patents
Speaking at the Blockchain Futurist conference in Toronto, Polymath CEO Trevor Koverko said the platform had received thousands of applications from organizations that wanted to create security tokens. It chose five for the launch: 7Pass, which offers funding services to the cannabis industry; a health blockchain firm called MintHealth; a real estate blockchain startup called BlockEstate; a blockchain financing system for startups called Corl and blockchain patent platform IPwe.
“These projects are broad,” Koverko said. “We could have done five venture funds or real estate projects, but we wanted one in each of our key verticals. Like the our name, Polymath, suggested, we wanted to show we can service the entire market from day one.”
Koverko said the five projects will effectively double the nascent market for STOs, but there are still challenges to be overcome. In the ICO market, for example, there are standards such as ERC-20 that stipulate how tokens should interact and transfer between parties and how data within a token should be accessed. That kind of standard doesn’t exist for STOs yet.
STO Standard in Development
Besides launching its platform, Polymath has been working behind the scenes with more than 50 different experts to create a draft standard that can be assessed by issuers, investors and others in the STO space.
According to Thomas Borrel, Polymath’s chief product officer, the firm convened a roundtable discussion with Deloitte, former Securities and Exchange Commission officials and other experts over the course of two days in Bermuda.
“For an STO to be successful, it takes an ecosystem and that ecosystem has to work in unison,” Borrel told the Blockchain Futurist audience. “When we were looking at the set of service providers that needed to function in this space, we realized the market was fragmented, which was slowing down ability of everyone to embrace or launch security tokens.”
The group’s efforts are being documented at TheSecurityTokenStandard.Org. Borrel said a draft of the standard is expected to be published by the end of the month.