All of the news and speculation regarding the crypto market surrounds the question of whether crypto digital assets are securities or currency. All of the noise and lawsuits have changed the interpretation and enforcement by the Securities and Exchange Commission relating to this issue. How this new digital asset industry is going to be regulated and protected from the various forms of corruption that could occur is still an unanswered question.
Using This Digital Asset as a Security
However, my interest has always been on using this digital asset as a security, and the significant changes that would occur in our national markets should we develop a system to control and protect investors using blockchain and digital assets (DAS) as the key to creating new markets in various asset classes, including securities issued by corporations.
All of the regulatory concentration has been focused on whether digital assets are securities. However, the most profound use of these digital assets, that will make the most significant changes in our financial system, occurs when we are able to use digital assets and the distributed ledger (i.e., blockchain recordkeeping) for the issuance, clearance, and settlement of digital asset securities.
Once the Digital Security Infrastructure Is Put in Place
The market transactions in digital asset securities will settle within seconds instead of days, allowing contemporaneous purchases and payments and interest earned on these transactions. Once the system is put in place the present and past ownership of digital asset securities will be immediately available to all people who participate in the DAS trading system.
Instantaneous buys and sells of DAS with immediate identification of seller and buyer, and the acceptance of delivery of those digital securities instantaneously, will reduce cost and increase the system’s efficiency. The DAS system will assure transparency and ensure that purchases and sales (short sales or long sales) are properly effectuated.
If current market activity in a particular security starts to trade in an unusual fashion with the stocks achieving extreme highs and extreme lows on volume that can’t be discerned, there will be an indelible system where companies and regulators can promptly see what is happening and why these transactions and movements are occurring.
Now that there is more clarity and definition of what crypto digital assets are, it is time to concentrate on digital asset securities and how they will change all aspects of the traditional financial markets and usher in new and explosive growth in our capital markets system.
Resistance from the Current Financial Industry
There will be significant resistance from the current financial industry to these major changes that will occur. Once the digital asset security system is universally adopted there will be no need for a transfer agent, a broker/dealer executing trades, or the current custody system. In effect, even national exchanges might prove to be unnecessary.
Decentralization and efficient Digital Asset markets will reduce costs to investors, increase efficiency, improve transparency and make review and regulation of the markets much easier.
The Beauty of This New Digital Security World
The beauty of this new digital security world is that the current Federal Securities Laws can be used to monitor trading, assure safe custody, and most importantly, allow for complete transparency of market executions.
Now that our government is recognizing the importance of digital assets, I hope it will now concentrate on digital asset securities (DAS). The new technology will be the most significant technological change that has ever happened to our capital markets.
Damon D. Testaverde, Chairman
Network 1 Financial Securities, Inc.
