Nasdaq has become one of the first multinational financial services companies to delve into non-currency usage of blockchain technology. On Monday, May 11, the company announced that it would begin to leverage the colored coin protocol Open Assets to “expand and enhance the equity management capabilities offered by its Nasdaq Private Market platform.”
According to Nasdaq CEO Bob Greifeld, the distributed ledger function of the blockchain will “modernize, streamline and secure typically cumbersome administrative functions, and will simplify the overwhelming challenges private companies face with manual ledger record-keeping.”
Nasdaq joins the blockchain-integrated securities exchange market field just a few weeks after Overstock’s Medici Project filed S-3 forms with the Securities and Exchange Commission, outlining its intention to issue new stocks or securities, including the potential to issue digital securities.
In an interview with Bitcoin Magazine, Overstock.com’s director of communications, Judd Bagley, welcomed Nasdaq’s announcement, noting several ways in which it could have a positive impact on the financial sector.
The first is in overcoming the hurdle of market acceptance. “The actual people who will be clicking the mouse authorizing real trades need to feel comfortable with this new paradigm, which upends a 75-year-old system some don’t currently see as broken,” said Bagley. Having Nasdaq on board could help to push blockchain technology into the financial sector mainstream.
Regulatory acceptance is another matter. According to Bagley, it’s up to companies like Overstock and Nasdaq “to impress upon regulators that a stock exchange based on decentralized ledgers is not only as good as what’s currently in place, but better.”
Bagley said that with Overstock in the process of getting SEC approval to issue digital shares, it has developed some “very interesting financial innovations” that will be rolled out on the Medici platform in the near future.
“Understandably, we’re expecting some probing questions. After all, regulators are, by nature, conservative. But this is one of the reasons we are so pleased to see NASDAQ getting in on blockchain trading. We can use all the support we can find when it comes to getting this new approach approved. Having NASDAQ working to meet the same regulatory goals as we are can only help us.”
Overstock CEO Patrick Byrne has been outspoken in the past about Wall Street’s culpability when it comes to shielding bad actors in the financial sector. Bagley does not expect that Nasdaq’s latest move will do much to affect this larger problem.
“One of the reasons young companies avoid the public equity markets is concern over the predations of illegal short sellers,” he explained. “Blockchain trading of pre-IPO shares will go far to keep bad actors from preying on these companies. So on that level, Nasdaq is joining us in doing a good thing.”
Trading of pre-IPO shares, however, represents only a small fraction of the overall financial trading picture, Bagley added. “Decentralized ledgers like the blockchain are also extremely well-suited for the trading of shares of public companies, and so we’re incorporating that functionality into Medici as well.”
Photo: Time Square/New York / CC BY 2.0
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