Initial Securities Offerings Vs Initial Coin Offerings
Bridging the Compliance Gap
The idea behind ISO is a fairly simple one – accept the reality. The reality is that sooner than later the regulatory authorities across the globe are going to start regulating Blockchain tokens. The reality is that we will most probably be judged by the Howey Test and the reality is that most of us are coming up with securities tokens. In order to get listed on OiX platform a token will have to go the distance and become compliant securities just like in the real world.
WHAT IS OiX EXCHANGE?
OiX is a Blockchain exchange with a difference. We do not list ICOs. We list tokens that are compliant and structured as securities. We believe that the Blockchain ecosystem and the investors can be kept safe by self-regulating. This is the model, we believe, that will bring blockchain start-ups into the mainstream and help them get the recognition and success that they deserve. There is a cloud of uncertainty around the many ICOs that are being announced. Our platform will enable them to become completely compliant from the start with as little effort as possible, allowing them to be better placed to ride out the changes that will be introduced by changing regulations.The project is as future-proof as it can be in this early stage, when regulations have not yet been established to bring ICOs into the mainstream. Ours is a common sense proposal based on blockchain technology.
INTRODUCING INITIAL SECURITIES OFFERINGS
WHAT IS AN IPO?
An initial public offering (IPO) is a financial event where a company first sells shares of stock to the general public. This typically happens concurrently with listing on a major stock exchange like the New York Stock Exchange (NYSE) or NASDAQ. When the company " goes public," anyone can buy and sell shares quickly and easily through a stockbroker.
WHAT IS AN ICO?
ICOs work similarly, but without the regulatory oversight and market listing that stock IPOs require. Instead, ICOs generally go directly to the public, without any stock broker or intermediary, via online transactions. While this eliminates a lot of problems, it also introduces an element of uncertainty and the potential for fraud that can threaten the entities doing the ICO.
WHAT IS AN ISO?
ISO is the Blockchain empowered equivalent of IPO. It has more stringent requirements than ICO but not quite as much as IPO. In the lack of a regulatory body the ISO goes as far as it is possible in an unregulated market to make sure that the companies offer as much information to the public as possible. ISO is there to ensure that investors are able to take more informed decision and the companies are able to get easy acceptance by regulators when regulations set in.
DISCLOSURES FOR ISO
A typical set of information that we would want from a company is as follows:
- Our mission
- Our business
- Key metrics
- Exchange rate information
- Market opportunity
- Our strengths
- Our strategies
- Our challenges
- Corporate information
- The offering
- Risk factors
- Industry data
- Use of proceeds
- Major corporate milestones (if any)
- Financial data (if any)
- Non- IFRS measures (if any)
- Enforcement of civil liabilities
- The effect on and across marketplaces
- Forward-looking statements
- Corporate history and structure (if any)
- Summary consolidated financial and operating data (if any)
ISO Vs ICO
A Side-by-Side Comparison
SUPERVISION AND CONTROL OF TRADING IN SECURITY
OiX deploys the Federal Information Processing Standard to protect the data at rest and all the transfer of data is encrypted. The Access to data is control by Access Control System and separation of duty principals. Access to privileged data is controlled using 2 factor authentication system and follows the federal standard of security control such as FedRAMP, NIST and makes reasonable effort to conform to the compliance guidelines.
Fraud Prevention:OiX employs segregation of duties policies to protect organization from unauthorized access to account and the data.
OiX SoD policy engine has several components:
- Define sets of two or more entitlements that should not be held by a single user.
- Access certification is used to periodically renew approved SoD exceptions.
Least privilege: OiX platform implements least privilege access system. This ensures everyone uses a standard user account, even system administrators and managers. This minimizes the threat since a standard user can’t install programs or modify system settings.
None of the Administrators have access to data or can take control of infrastructure. Access to data and management dashboard is controlled by combination of 2FA software and hardware tokens.
The OiX platform enables users to include multiple stake holders and more than one hardware and software tokens for successful access to account, data and infrastructure.
Privileged Access: The platform by design does not grant admin rights to any user. The privilege access requires multiple stakeholders to log into system. The ‘deny all’ rule ensures, the data is protected by unauthorized access. We supervise the transactions to the point that an automatic trigger is pulled whenever there is a large/unusual transaction.
Monitoring: Transactions are monitored using patented proprietary algorithms and automatic rules and flags are applied to protect investors from unusual and malicious transactions.
KYC and AML: With KYC and AML policies strictly in place at the time of on boarding of both tokens and investors, a trust environment exists.
Pump and Dump: We have strong policies against pump and dump. OiX proprietary Exchange Circuit Breaker algorithm works much like the Securities Stock exchanges. If any token sees unusual activity and the price of a token rises more than 7% in one minute, the algorithm halt trading of that stock for 30 minutes and the cycle repeats till such time as pump and dump attacks go away. This helps keep the platform compliant with the stock market regulations in various countries.
TIMELY DISCLOSURE OF CORPORATE INFORMATION
We are introducing a new feature as yet unseen in the Blockchain market. While we would ideally like something similar to the 10Q and 10K filings under US SEC guidelines, we still have to come up a mechanism for doing it. We are advising our issuers to maintain an Investor Relations page for all pertinent information and for quarterly and annual financial disclosures but we realize that going for a standardized format like EDGAR or XBRL will be a tall order in the short term.
ISO is the closest thing you can get to a regulated token in the absence of a clear mandate on Blockchain tokens. Our efforts are largely to protect both the issuer and the investor. ISO, as we say, is FUTURE READY.