Overstock.com has confirmed getting an approval from the Securities and Exchange Commission (SEC) to issue company stock using blockchain. The only initial purpose of the technology was underlying bitcoin while now more and more companies strive to apply it to other spheres.
Blockchain can track the exchange of money but at the same time it can track the exchange of anything else that holds value, including stocks, bonds, and other financial securities. Overstock has appreciated this advantage and made it work for itself.
Being an online shopping retailer based in Salt Lake City, Utah, Overstock trades in a broad range of products including furniture, rugs, bedding, electronics, clothing, and jewelry at low prices. The company ranked in Forbes list of the Top 100 Most Trustworthy Companies in 2014.
Overstock is known to be developing a large cryptofinance initiative called Medici. CEO Patrick Byrne says: “The cryptorevolution has arrived on Wall Street. We’re making it official by offering the world’s first cryptosecurity.”
By word of “cryptosecurity” he understands the idea to issue private bonds, which do not require regulatory approval. The idea was invented and successfully realized by Overstock.
The issue of the bonds is based on the technology TØ.com which “refers to the fact that trades on the system securely settle same day, as opposed to three days later”. Wall Street traders call it “T+3”. Issuing bonds on TØ.com platform serves as evidence of cryptotechnology as a way to provide a more secure access to funds.
The next step towards the so-called cryptorevolution is recent approval of Form S-3 by the SEC. It means that Overstock is authorized to issue public securities via the Internet. Byrne announced the news at a bitcoin conference in San Diego and noted that he can’t define the exact terms when new technology will be applied. “You can assume its high on our list of priorities for 2016” – he said.
Byrne compares the new technology with the Internet describing how much it can contribute to our society. It will offer a reliable, transparent and highly-automated way to track who owns a security at a given time. Indeed it can turn the market upside down.
Systems operated by Nasdaq and the New York Stock Exchange as well as middlemen controlling the market can appeared to be no longer required. Byrne told Wired earlier in the year that there are ways under the current system to rig the market which he wishes to change.
Byrne’s project, although quite promising, has already met some suspicion. Jeffrey Steiner, a lawyer at Gibson Dunn specializing in blockchain technology, has warned Overstock that its investors may be at first wary of the technology as there has been no precedent. Nevertheless he admitted the financial industry’s growing interest in the blockchain.