🌴 tZERO Goes All-In On Security Tokens

While some didn't like their move, it shows tZERO's commitment to tokenization.

Gooood morning, Rainmakers! ☀️

As always, we have two captivating topics for you to dive into:

1️⃣ 🌴 tZERO Goes All-In On Security Tokens

🛑 A Special Surprise 🛑

2️⃣ 🧑‍⚖️ The CFTC Commits To Regulating Non-Security Crypto

Without further ado, it's time to…

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🌴 tZERO Goes All-In On Security Tokens

In the ever-evolving world of tokenization, tZERO has recently launched a new website, showcasing its capabilities and commitment to the industry. In addition, the company backed by the Intercontinental Exchange (ICE), owner of the New York Stock Exchange (NYSE), has positioned itself as a leader in the tokenization space, offering a wide range of services to both issuers and investors.

tZERO recently launched a white-label solution for primary offerings and secondary trading, allowing issuers to own the investment and trading experiences with their own branding while leveraging tZERO’s licenses, such as its FINRA-member broker-dealer and SEC-registered alternative trading system (ATS). With the new website and features, tZERO further solidifies its position as a leading player in the tokenization space.

Regarding trading, tZERO now supports customized marketplace capabilities such as auction-style bidding and block trading. This allows companies to take advantage of competitive price discovery and execute large private securities transactions, similar to what is possible with post-IPO companies.

Investors have been and will continue to be at the forefront of tZERO’s mission. As the SEC cracks down on Web3 projects for securities law violations, tZERO is well-equipped to handle any scenario. It has all the necessary licenses and even announced the shutdown of its crypto exchange.

The company’s decision to shut down its crypto exchange, tZERO Crypto, on March 6th shows a clear commitment to its regulated securities business and a belief that most digital asset securities will trade in a regulated ecosystem. Despite this, industry leaders see the move as detrimental to tZERO. I believe this comes from a misunderstanding of what tZERO shutting down tZERO Crypto means. As the regulatory environment around crypto assets is clarified by the SEC and other regulators, tZERO is positioning itself as the go-to platform for digital asset securities trading.

I've heard a picture can speak a thousand words, so here's one better; a GIF of what tZERO shutting down their crypto exchange services is saying to the industry👇

The shutdown of tZERO's crypto exchange, tZERO Crypto, may have raised concerns among some in the industry. Still, as we will see in the next section, it is a positive move for the company and its stakeholders. By refocusing its resources on the security token platform and demonstrating a commitment to compliance, tZERO is aligning itself with its mission and setting the stage for future growth and success. Furthermore, this reassertion of focus reflects the company's all-in dedication to creating a safer and more secure environment for its users while positioning itself as a leader in the security token industry.

Here's why:

  1. Better Alignment with Company Goals: tZero is a leading player in the security token industry, and this move clearly signals that the company is focused on its core mission. By closing down its crypto trading business, tZero can now focus its resources and energy on developing its security token platform, which has the potential to revolutionize the way that traditional securities are traded and managed.

  2. Improved Security for Investors: By closing down its crypto trading business, tZero is removing a potential point of vulnerability for its users. Cryptocurrency exchanges have been subject to numerous hacks and security breaches, which can lead to the loss of investor funds. By eliminating this risk, tZero is creating a safer environment for its users and helping to build trust in the security token industry.

  3. Increased Opportunity for Growth: tZero's decision to shut down its crypto trading business will allow it to redirect its resources toward developing its security token platform. This will likely result in faster progress and the launch of new and innovative products. In addition, by focusing on security tokens, tZero is positioning itself as a leader in a rapidly growing market, which has the potential to be much larger than the cryptocurrency market, benefiting both tZero and its users.

  4. A Stronger Focus on Compliance: Security tokens are subject to different regulations than cryptocurrencies. Their decision to shut down its crypto trading business shows that the company is serious about complying with these regulations. This will help to build trust in the security token industry and make it easier for tZero to attract new users and partners.

In conclusion, I believe tZero's decision to shut down its crypto trading business is a smart move that will benefit the company, its users, and the security token industry. By focusing on its core mission, improving security for investors, increasing opportunity for growth, and demonstrating a commitment to compliance, tZero is positioning itself as a leader in the security token space and laying the foundation for a bright future.

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🧑‍⚖️ The CFTC Commits To Regulating Non-Security Crypto

The U.S. Commodity Futures Trading Commission (CFTC) recently committed to regulating crypto tokens that are not considered securities. This announcement was made by CFTC Chairman Rostin Behnam during the ABA Business Law Section Derivatives & Futures Law Committee Winter Meeting.

Behnam stated that there is a gap in regulation for non-security tokens in the crypto-cash market, and the CFTC is ready to fill this gap if given the authority by Congress. The 118th U.S. Congress has begun and will last until Feb. 3, 2025. The CFTC will engage with this Congress to achieve this goal.

Behnam explained the need for regulation by pointing to various bankruptcies and collapses in 2022 and the need to protect customers and limit failures in the crypto space. While it is clear that some cryptocurrencies, based on current US regulation, were issued as securities, the CFTC has asserted that there can be non-security token cryptocurrencies. These tokens are commonly known as utility tokens.

He also highlighted the CFTC's efforts in the crypto space, including the compliance branch's request for crypto derivatives platforms to demonstrate regulatory compliance and regular meetings with registered platforms. Behnam said,

Regulation is important to protect consumers and to avoid failures which cannot reliably be confined within any limits across the local and global financial systems. Regulation is necessary to protect customers and to prevent failures. It makes no difference if one or more of these things happen in 2023 or 2033; we still need to take action. There is a new Congress, and I want to continue participating in legislative drafting and offering my expertise in that capacity whenever it is required.

The CFTC is currently playing a minor role in crypto regulation compared to the U.S. Securities and Exchange Commission (SEC), which dominates the area since many crypto projects can be considered securities. However, developments last year have suggested that the CFTC could gain a more significant role in crypto regulation with the evolution of utility tokens. This comes with SEC Chairman Gary Gensler endorsing a more substantial role for the CFTC.

Behnam concluded by mentioning the CFTC's success in bringing forward 69 actions involving digital assets to date, with cases involving digital assets making up 20% of the regulator's 82 actions last year. He called these results "outstanding," given the CFTC's limited authority.

With the CFTC's commitment to regulating non-security crypto and the SEC moving full steam ahead on security tokens, we can expect further developments in digital asset regulation. Stay tuned!

💦 What else is Drippin’

This year's edition is all about the most significant moves in the institutional adoption of tokenized assets, and let me tell you, it's MASSIVE. We've got all the heavy hitters you'd expect, like KKR and JPMorgan, but also some exciting new players like AllianceBernstein, Figure & Provenance, and Regulated Liability Network (RLN).

Trust us. You won't want to miss this deep dive into the world of institutional security tokens. So sit back, relax, and get ready to be wowed by all the action in The State of Security Tokens 2023 - Institutional Edition.👇

State of Security Tokens 2023

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