Why issue tokens when selling shares if they cannot be traded on crypto exchanges?

Recall that tokens, which are symbols of ordinary securities such as stocks or bonds, are prohibited on crypto exchanges by law in all countries.

The tactical reason is that you, as the owner of the tokens, can transfer them to one or more people BEFORE a liquidity event occurs. That way, the authorized bank will enter into a contract and follow all the statutory AML/KYC procedures with the people you specify. Naturally, it can also be yourself.

There is also a strategic reason.

When business owners come to the decision to sell their companies’ shares, they do so under the pressure of circumstances: there is not enough money for development, and there are no other legal mechanisms to raise funds. The regulation of the circulation of company shares is a projection of power (violence, if you like) generated by the state, along with taxes and the monopoly of the national currency.

This is why the ICO approach was so popular even among serious entrepreneurs, despite its obvious bad smell — selling tokens allowed to get money for development without giving up control of the enterprise. Of course, ICOs in which tokens were real assets were quickly outlawed.

Broken down into many easily traded shares, the asset could be sold for more than in a mass sale of the whole chunk, if a larger markup could be justified in the eyes of a small and inexperienced buyer. An important condition, however, is that the transition to retailing should not be accompanied by an increase in overhead costs.

The current system has a serious problem with this. Each jurisdiction regulates securities differently. All jurisdictions have their own primary and secondary markets. Some secondary markets are interconnected to some degree, but the bridges through depositary receipts and arbitrage are narrow and fragile. Global liquidity does not exist. The primary markets are not even theoretically compatible because the audit systems are significantly corrupt.

Of course, tokenization doesn’t solve anything yet. It does not make investments more attractive. It does not create additional liquidity, that is, it does not offer cross-border asset compatibility. Tokenization does not remove all other existing restrictions: not everyone can sell and buy your securities (ban on sales to so-called “unqualified investors,” etc.). STO (security token offering) does not have any of the key features of an ICO (initial offering bonus cascades, free trading on cryptocurrency exchanges, etc.).

Worse, tokenization makes the process of bringing a company’s shares to market more complicated and expensive. Legal costs are high. Technical support for the tokens themselves is not free either.

However, we believe that the stoicism required today is justified. As paradoxical as it may sound, cross-border global liquidity via tokens will soon emerge precisely because the old global world is collapsing at an accelerated pace.

Global Liquidity Is Coming

Textbooks do not question the value of the idea of securitization. The default view is that the practice of dividing control of an enterprise into small, easily transferable parts is good for the economy. It is thought to be a win-win mechanism that businesses and households alike need.

This is not the case today. One person can benefit and the other cannot, even if both have equal rights under formal laws. It all depends on unwritten rules. There are several non-overlapping shady schemes in which different entrepreneurs and investors have completely different real rights.

Similar phenomena occur in the case of money per se. The U.S. dollar is a multi-loop type of money. Dollars (and all other fiat currencies, which are actually tied to dollars through a series of manipulative schemes) have different purchasing power in different hands. Unsecured by anything substantial, dollars are de facto the only currency for which real things, such as energy resources, can be sold. Global trade in food and fertilizer is also done in U.S. dollars. This status quo was achieved and is still maintained by both diplomacy and force of arms.

Having received this “reserve currency” as payment, resource sellers cannot buy anything really substantial with it. They can buy yachts or famous soccer clubs, but they cannot buy modern technology, an Opel plant or a gas delivery system to the homes of Europeans.

But everything comes to an end, and this month, in March 2022, the trigger finally went off, triggering an irreversible process of destruction of the current world order and the planetary dollar matrix. In a couple of years, real resources will not be sold for dollars and euros, but for rubles, dirhams, yuan, and the currencies of other countries where real material things are produced.

The United States and its allies and are no longer the dominant players. In hard times, it is important to compare not GDP, but the cost of substitution. The GDP of Western countries consists of uncritical (and essentially useless) services, stagnant cultural influence, imperfect financial superstructures, statistical surcharges, the result of auditing diktats, and already unnecessary licensing fees for technologies that everyone in the world already has.

All these “products and services” are not difficult to replace or simply ignore. But no government can ignore the lack of heat, electricity and food in citizens’ homes.

In parallel, the system of shadow schemes in the mechanisms of stock circulation will follow the destruction of the USD consensus and disappear as well. Therefore, it now makes strategic sense to tie traded stocks to crypto-tokens, or better yet, to make crypto-tokens the primary instrument for issuing securities.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store