NEW YORK (Reuters) - Overstock.com Inc (OSTK.O) unit t0.com (tZERO) and BOX Digital Markets said on Tuesday they plan to launch a regulated exchange for security tokens.
Security tokens are digital representations of financial assets such as stocks, real estate or debt. Analysts said there are several projects in the works that would tokenize these financial assets.
BOX and tZERO said in a statement they entered into an equally owned joint venture to create an exchange that will list and publicly trade security tokens, including those converted from a company’s existing stock.
“I would like to see something trading in Q3,” Overstock Chief Executive Officer and founder Patrick Byrne said in a phone interview.
The companies need approval from the U.S. Securities and Exchange Commission to create what would be the first regulated security token exchange.
Lisa Fall, chief executive of BOX Digital and president of BOX Options Exchange LLC, will be the CEO of the joint venture.
BOX Digital is a wholly owned subsidiary of BOX Holdings Group LLC, which owns and operates BOX Market, an equity options marketplace and a facility of BOX Options Exchange.
“The introduction of this technology (blockchain) is likely going to be controversial because it’s so much better than the current technology that the capital market is built on,” said Byrne.
“Going hand in hand with a blue-chip partner like BOX would be a great advantage for us,” he added.
Blockchain, the system powering cryptocurrencies like bitcoin, is a shared database that is maintained by a network of computers connected to the internet.
TZERO said it plans to contribute cash and license its blockchain technology for operation of the security token market. BOX Digital will contribute expertise and personnel toward obtaining regulatory approval and running the security token exchange.
The cryptocurrency market has been recently mired in uncertainty as regulation of these assets remains a primary concern and this has been reflected in sluggish virtual currency prices the last few months.
Some countries such as South Korea have legalized initial coin offerings, a funding strategy in which a company creates a token, or digital currency, and sells it to the public to raise funds. But many believe there will be a crackdown by U.S. regulators on fraudulent token sales before the end of the year.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve Orlofsky and Lisa Shumaker