Regulated exchanges for crypto security tokens could transform equity capital markets
New efforts to execute equity transactions on blockchain are emerging, for now concentrated in private equity, as disruptors seek to build investor and regulatory confidence in security tokens.
On August 15, Swarm, a Palo Alto-based blockchain platform for private equity, which markets itself to private wealth managers and family offices as an open means of access to alternative investments, announced the prefunding of the so-called Robinhood Equity token (Rhet), the first security token of its kind.
Robinhood is one of the new generation of low-commission conventional stock trading apps in the US, which is itself challenging the established brokerage model. The new Rhet initiative allows accredited investors on the Swarm platform to reserve their stake in a fund created for the purpose of holding equity in Robinhood.
Once the minimum funding goal is reached, a Swarm syndicate manager will form an entity to acquire equity through established relationships with former employees and other equity holders in Robinhood, and convert committed funds into Rhet equity tokens.
It all looks a little cheeky. Robinhood itself is raising no equity here. It is not even involved. Swarm is hoping to use tokenization to bring secondary market liquidity to stock in a private company, which, ironically enough, is itself in the stock brokerage business.
“Secondary equities transactions and refinancing of legal entities which hold private company equity are not new in the United States,” says Philipp Pieper, chief executive of Swarm Fund.