tZero, the token platform subsidiary of Overstock.com, is ending its Security Token Offering (STO) tonight. If readers are not familiar, STOs are intended to bridge the gap between the financial world and the blockchain. The main difference between an ICO and an STO is that an STO must be backed by a tangible asset like a company’s profits or shares. ICOs are usually utility tokens that are more of a promise or coupon.
Furthermore, STOs offer more security as there are regulated by the SEC. The beautiful thing about this is that things that were traditionally illiquid can now be liquidated as you can make art or real estate into tokens. For example, let’s say you own a Picasso and you want to turn it into cash fast, you can offer an STO on its value and divest the painting to any numbers of investors.
Many believe the STO could even soon rival the ICO. So, how does tZero fit into all this? The latter is an alternative trading system on the blockchain, where buyers and sellers are matched.
There is much speculation on how much the company has raised – those numbers will be announced on Thursday during Overstock’s earnings call. Goals for the ICO were originally as high as $500 million and still, by company reports, are expected to crest $250 million, which would come close to the record by Filecoin for $262 million.
Overstock.com has always been ahead of the curve on cryptocurrency and its place in customer service. The current tokens sold are seeding the ATS platform and can be used like chips to buy and sell on the platform.
When tZero was immediately launched, the STO quickly saw some 2,000 investors commit bringing $100 million (Just to note: Overstock had filed for its ICO to be classified under Regulations D and S instead of as a traditional securities filing. This means that U.S. citizens must be accredited investors to have invested and that offshore transactions must not involve U.S. citizens), according to Overstock Founder Patrick Byrne.
“Years ago we saw the world-shaking potential of blockchain, and since then we have been methodical in building tZERO into a company that will bring great efficiency and transparency to capital markets domestically and abroad.”
The company has faced plenty of regulation to get to this point, and the company had this to say on the market going forward:
“Today, so many of us can’t participate in the capital markets the way accredited investors or well-connected investors can. And those of us that are trying to raise money have a hard time crowdfunding or raising money in a democratized way. It’s grey. It means some people are trying to comply with it, some people are trying to push the edge of it. I think it’s time for the SEC or Congress to provide guidance to say ‘If you’re issuing a coin or a token, security token or an ICO, this is what makes it a security and this is what not.’ Clarity will be very helpful here,” Johnson said.