Tokenized Stocks, Crypto Lending and Paying 2019 Taxes in BTC

Off the Blocks, Vol 49, January 8, 2019

This newsletter is our weekly roundup of some of the significant blockchain news, that provides an overview of the rapidly changing blockchain landscape to help you map your blockchain strategy and be aware of regulatory announcements globally.

New Tech, New Models

This time in 2018, Blockchain was the rage. Every company that tagged “Blockchain” to their name witnessed a pop in their valuations. Tulip Biomed and Long Island Iced Tea Blockchain come to mind. A number of others cashed in on the ICO craze that also saw the short lived revival of iconic names such as Kodak via the KodakCoin. As most of this made up sizzle has now fizzled, prices of major digital assets dropped by over 70% and then some more.

Regulators across the world have have reacted differently to the market conditions. The SEC in the US has all but taken a stance that all tokens are securities and need to comply with the law. India and China outright banned cryptocurrencies, while Malta embraced a legislative solution to regulating crypto and digital assets.

As we start 2019, the serious work behind the scenes is now starting to come out of the shadows. We can now clearly see a fundamental shift in technology and associated business models. Companies with a blockchain first approach are both global and public right at their inception. To build and manage a company at this scale requires a strategic rethink. For example, equity is no longer a static entry on a cap table. Companies can now create dynamic, programmable versions of equity holdings recorded on a blockchain, access global investors with relative ease and provide the benefits of liquidity simultaneously. Of course there are many tech, legal and business considerations that inform the structure and functioning of the company, and just like any other modern tech company, this requires an ecosystem of solutions.

Dev tools, wallets, custody solutions, KYC/AML compliance, oracles, security, payments, privacy, identity, compliant broker-dealers, issuance platforms, etc. are a few examples of underlying infrastructure required to make user experience as frictionless as possible. While most of these have been shown to work individually, there is still considerable amount of work to be done to ensure interoperability and at a scale that enterprises can embrace. Simultaneously, enterprises are working on their own set of solutions based on permissioned architectures such as Hyperledger, Quorm or R3 Corda that make trusted B2B interactions possible.

Pitchbook’s Q3 2018 market map reveals a flush of investment that has gone towards startups focusing on crypto-investment, compliance and enterprise solutions, among the multiple segments demarcated within the market map. These are all exciting companies building products and gaining traction in both consumer and enterprise market segments.

Source: Pitchbook

Now for some significant news form the world this week:

  1. Tokenized US stocks are here: The long awaited DX Exchange launched this week. The exchange features tokenized stocks and crypto trading pairs, allowing you to buy stocks like Netflix and Apple on the same platform where you buy cryptocurrencies like Bitcoin Cash, Litecoin and Ripple etc. DX Exchange uses Nasdaq’s Financial Information Exchange (FIX) protocol to facilitate trades. Using this platform, DX Exchange allows users to swap tokenized stocks in major global companies, including Amazon, Baidu, Apple, Facebook, Google, Intel, Microsoft, Netflix, Nvidia, and Tesla. For now, the exchange will only be available to residents of the European Union, although the company expects to make trading available for U.S. customers in 2019.

  2. Voting in Thailand: The National Electronics and Computer Technology Center (NECTEC) of Thailand has developed blockchain technology for e-voting. The technology reportedly can be deployed in tandem with traditional voting as Thais become more technologically literate. According to NECTEC, once 5G is eventually adopted, all votes will be connected with the new technology. In order for the system to function, it requires a controller, voters and candidates. Prior to the election, the controller can verify voter identity and candidate qualifications. Voters will purportedly be able to vote by email and must be verified by mobile camera.

  3. AMD and Consensys partner for cloud computing: AMD and Consensys have formed the W3BCLOUD to develop optimized datacenter solutions for emerging blockchain workloads. By leveraging the hardware expertise at AMD and blockchain software experience of ConsenSys the duo plans to design systems for applications for governments and commercial enterprises, while accelerating the adoption of decentralized applications (dApps). Halo Holdings, a UAE investment firm is also a part of the deal. Notably, Consensys is a blockchain advisor to the UAE government.

  4. Trade Finance in China: The China Banking Association (CBA), the country’s self-regulatory organization for the banking sector, is launching a new blockchain-based platform for trade finance. Over 10 major banks in the region have signed up for the platform, including HSBC (China), Bank of China, China Merchants Bank, Ping An Bank, China Postal Savings Bank, among others.

    “The launch of China’s trade finance blockchain has brought together the trade chain of different banks to make cross-bank transactions much faster, safer and more realistic.”

  5. Crypto-lending is thriving: Creditors focusing on the crypto arena say they’re finding strong demand from borrowers who don’t want to sell their virtual coins at depressed prices, as well as from big investors eager to borrow coins for short selling. It’s putting lenders on both sides of Bitcoin’s bust: Helping believers pay their bills while awaiting a rebound, and also enabling bets by people who think the drop has further to go. For example, Genesis has about $140 million in loans outstanding with an average duration of six weeks and the company typically requires customers to deposit around $1.2 million in fiat to take out $1 million of crypto.

The Final Word: Overstock becomes the first US company to pay taxes in Bitcoin


Online retailer Overstock announced that it will pay a portion of its Ohio state business taxes in Bitcoin, starting from this year. Ohio is the first state in the U.S. and the first governments in the world to accept Bitcoin for tax payments. The state’s online platform called allow businesses to pay taxes with cryptocurrency. Eligible for payment on the website include 23 different taxes. Overstock is bullish on Bitcoin and cryptocurrencies. It became the first major retailer to accept crypto for purchases on its website in 2014.

We have long thought that thoughtful governmental adoption of emerging technologies such as cryptocurrencies (when accompanied by non-restrictive legislation over these technologies) is the best way to ensure the U.S. does not lose our place at the forefront of the ever-advancing global economy.

- Overstock CEO Patrick Byrne said in statement.

About Proteum
Proteum is a global blockchain advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their capabilities so that they can own and control their future. Let's put blockchains to work for your business. |  | Twitter: @proteumio | Telegram