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Securitize Gets FINRA Nod for Broker-Dealer/ATS Acquisition

Securitize Gets FINRA Nod for Broker-Dealer/ATS Acquisition

Security token firm Securitize said on Tuesday it got the green light from the US regulators to move forward with a duo of acquisitions, a broker-dealer and alternative trading system for digital assets.

The San Francisco-based startup, which helps firms tokenize their securities and assets, got such an endorsement to buy Distributed Technology Markets (DTM) in a bid to enter more regulated markets and reach institutional investors.

Distributed Technology Markets is part of a family of companies, and the acquisition will include taking over its sister company, Velocity Platform, which runs a money services business with money transmitter licenses in several states.

As part of the takeover, the newly acquired entity will be renamed Securitize Markets, which will offer a complete digital suite of services from primary issuance through secondary trading. Jonathan Kelfer, Co-founder and former CEO of Velocity Markets, has been named as the firm’s new CTO.

Securitize will soon be capable of offering blockchain-based securities and at some point to develop its own secondary marketplace, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). This process gave the company firsthand insight into such processes.

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Regulators Clear Security Token Trading Systems

“By integrating Securitize Markets into our existing digital transfer agent platform and services, we can now offer a seamless digital solution for issuers and investors that dramatically improves the experience compared to the poorly digitized processes that are being used today,” said Securitize CEO and co-founder, Carlos Domingo.

Chris Wittenborn, CEO of Securitize Markets, also noted: “Securitize Markets is continuing the initiative of working hand in hand with regulatory bodies to construct a compliant capital markets framework for private securities – including digital asset securities. We’re excited to join forces with Securitize in an effort to continue developing this market.”

Securitize will capitalize on DTM’s regulatory approval to operate as an alternative trading system (ATS), which facilitates transactions in securities that are not publicly-traded. It creates a way for companies to tokenize equity and issue it on a blockchain without running afoul of regulatory obligations.

Many Fintech and blockchain firms have responded to US regulators’ classification of certain digital tokens as securities and therefore coming under the SEC’s supervision. Wall Street’s top watchdog says that ‎any entity that wants to become an ATS needs to register with the SEC as a broker-dealer and become a member of a self-regulating organization, such as ‎FINRA.‎

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German Finance Minister Speaks Out Against ‘Private Cryptocurrencies’

German Finance Minister Speaks Out Against ‘Private Cryptocurrencies’

German Finance Minister Olaf Scholz spoke out on Friday about proposed cryptocurrencies like Facebook’s Libra and JPMorgan Coin, adding that Berlin would reject them.

Scholz said during a panel discussion at the European Banking Congress in Berlin he doesn’t support privately-issued digital currencies, according to a report by Reuters.

The German official added that while it was essential to boost the digital transformation of Europe’s banking systems, this doesn’t not extend to accept a parallel currency. He also invited the new administration of U.S. President-elect Joe Biden to join a Franco-German proposal aimed to tackle the risks stemming from such new technologies.

Berlin said earlier it will work closely with its European and international allies to prevent cryptocurrencies from becoming alternative currencies.

The European Commission published in September its EU legislative framework for crypto assets, which came as part of the broader policy initiative on digital finance. The proposal offers a bespoke legislative regime for markets in crypto-assets and relevant service providers not covered elsewhere in the EU financial services regime.

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In addition, the MiCA will offer a pilot regime for crypto-related market infrastructures, which represents a so-called ‘sandbox’ approach. The term has particular relevance for the crypto industry, and the EU scheme was described as a controlled environment under which new firms or new ventures from established brands would be able to live test their ideas.

The commission further explained that successful applicants can test their new products without the cost of overheads such as compliance and exhaustive consumer protection. This allows ‘temporary derogations from existing rules’ so that regulators can gain experience on the use of distributed ledger technology in market infrastructures while ensuring that they can deal with ‘risks to investor protection, market integrity and financial stability’.

The new rules will also allow operators granted approval in any member state to provide their services at the EU level (passporting). Safeguards include capital requirements, custody of assets, a mandatory complaint holder procedure available to investors, and rights of the investor against the issuer.

The legislative initiative covers activities including crypto-to-fiat and crypto-to-crypto trading, custody, and asset-backed coins. For stablecoins in particular, a bespoke legislative framework is to be considered, and issuers of stablecoins would be subject to more stringent requirements in terms of capital, investor rights and supervision.

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