The Malta Stock Exchange is partnering with one of world’s largest cryptocurrency exchanges by volume. In collaboration with Binance and Neufund, an equity fundraising platform based in Berlin, it plans to create the world’s first decentralized global stock exchange based on blockchain technology. The exchange will allow companies in the EU to create tokenized securities called Equity Token Offerings, which essentially allowing them to use the blockchain to legally raise funds from customers.
The pilot is expected to launch in 2018.
“The blockchain holds enormous potential for the issuance of securities,” says CapLinked CEO Eric M. Jackson. “Tokenized securities provide improved transactional efficiency, increased liquidity, and greater financial inclusion than using pieces of paper to represent ownership in an asset. And with an ecosystem of issuance services, regulated exchanges, and transactional compliance tools coming online this year, we estimate the market cap of equity tokens alone could reach $1 trillion by 2020.”
The mechanics of the exchange will resemble a traditional stock market. Neufund will onboard companies seeking capital by issuing token securities through an “Equity Token Offering”. Based on the Ethereum blockchain, it essentially tokenizes real world equity shares, allowing a company anywhere in the world to combine the fundraising leverage of an ICO, a VC round of funding and the issuance of shares through a traditional IPO.
“Neufund has successfully created a legal and technical infrastructure that serves as a primary market for companies from both the blockchain and non-blockchain space to offer tokens guaranteeing equity rights, which Neufund has coined ‘equity tokens,’ the company states. “Neufund is already regulated in a way that allows companies to conduct fully legal fundraising on the blockchain. Investments can be conducted using both ETH and EUR, bridging the gap between the crypto world and the world of traditional investments.”
Neufund aims to empower entrepreneurs and startups that are looking for liquidity beyond borders. Investors no longer need to be “accredited” or meet extremely high investment thresholds, allowing only a limited class of investors to participant in innovative companies or dictate which entrepreneurial ventures are worthy of funding. According to the company, “One share has the potential to be represented by one million equity tokens, and can be held by anyone from a parent or grandparent to major VC firms like Sequoia Capital.”
It uses incentives and governance mechanisms to ensure high-quality offerings.
Pending regulatory approval, investors would be able to buy tokens on Binance through a system designed to trade tokenized traditional financial assets. “This is a new chapter for Neufund and Binance. Complete ecosystem from issuance to trading of Equity Tokens thanks to Malta Stock Exchange,” said Binance CEO Changpeng Zhao via Twitter.
“We are happy to announce a partnership with the Malta Stock Exchange and Binance, which will ensure high liquidity to equity tokens issued on Neufund,” says Zoe Adamovicz, the founder of Neufund. “The forthcoming pilot project will allow us to test the market’s reaction and conduct the general idea in a minimized-risk environment,” reports Business Insider Polska.
The Malta Stock Exchange and powerhouse OKEx, one of the world’s largest cryptocurrency exchanges, are also teaming up to launch OKMSX, an institutional grade trading platform for security tokens. The collaboration marks a breakthrough for fintech development, forging a path to legally list and trade tokenized securities. The new platform is scheduled to launch by the first quarter of 2019, servicing clients globally from Malta.
Both Binance and OKEx moved to Malta earlier this year.