Transferable Equity Instruments on Blockchain

Transferable Equity Instruments on Blockchain

Background and Purpose:

Blockchain Technology: A distributed database for storing and recording transactions, with transparent, auditable and immutable characteristics.

Initial Coin Offering (ICO): A method of raising funds by issuing new cryptocurrencies, often used for financing start-up companies.

Regulatory Issues: ICOs often face gaps in existing regulation or require special regulation. This paper aims to provide a blockchain securities trading platform that meets regulatory requirements.

Content:

System and Method: Provide a system and method for issuing, purchasing and reselling transferable securities on a blockchain platform.

Automated Transfer Capability: The server computer provides automated transfer capabilities for security holders.

Compliance: Ensure that transactions comply with current and future federal, state and issuing and holding entity rules and regulations.

Key Components and Processes:

User Device and Server Computer: Through network communication, the user device transmits investor information, and the server computer processes transactions and authentication.

Blockchain Platform: Deploy securities contracts, record transaction history, and ensure that transactions are transparent and immutable.

Certification Authority and Whitelist: The server computer synchronizes data with the certification authority to create and maintain a whitelist of certified investors.

Transaction process:

Pre-sale period: potential investors register and review documents to get discounts to buy securities.

Issuance period: certified investors register, accept terms, and purchase securities.

Off-market period: ensure investors are not brokers to prevent insider trading.

Trading period: securities are traded in the secondary market.

Smart contracts and contract types:

Agency contract: allows one party to participate in blockchain transactions on behalf of another party.

Escrow contract: ensures the security of transaction funds and releases funds after meeting transaction conditions.

Aggregation contract: combines multiple agency contracts or other contracts into a whole to facilitate collective action.

Regulatory and compliance mechanisms:

Automatic review and enforcement: the system automatically reviews transactions according to preset rules and implements compliance measures.

Dynamic price setting: dynamically set securities prices based on cryptocurrency price fluctuations.

Tax calculation and reporting: the system automatically calculates and reports investors' tax information.

Technical implementation and advantages:

Blockchain technology application: based on existing communication protocols and encryption algorithms, realize decentralized securities trading.

Improve efficiency and transparency: reduce intermediary links, improve transaction efficiency, and ensure the transparency and security of transactions.

Wide applicability: The system is not only suitable for compliant environments, but can also be adjusted accordingly according to the regulatory requirements of different jurisdictions.