On April 1, 2020, the US Securities and Exchange Commission announced it has postponed a final decision on the Boston Security Token Exchange’s proposed rulebook. A period had been open for public comment, where a few parties expressed concerns over BSTX. Now, the SEC is seeking additional comments and aims to clarify the regulatory ambiguity surrounding the potential security token exchange.

The SEC Postpones its Decision on BSTX – Explained

In May of 2019, the Boston Security Token Exchange (BSTX) filed a rulebook with the SEC. BSTX had the ambition of becoming the first regulated security token exchange in the United States.

Later that year, in October, the rulebook was published by the SEC. The commission sought public consultation on the proposal.

Now, according to a letter published Wednesday, the SEC has decided to delay its decision on either approving or disapproving the proposed exchange. Instead, the SEC is seeking additional comments, as it has only received two thus far. The SEC was expected to announce its final decision in early April.

BSTX is a joint venture by tZERO and BOX Digital. One of the comments received by the SEC emphasized how tZERO’s token had dropped 85% over the last two years. The comment also encouraged the relationship between tZERO and Overstock.com be examined further.

The other comment suggested BSTX’s approval would result in a “significant change for the equities market.” Neither of the two comments were in favor of an approval, given the information available.

Nasdaq VP Joan C. Conly also expressed worry over the proposal. In a letter to the SEC, she wrote,

“Nasdaq respectfully submits that the BOX proposal may place an unreasonable burden on competition because the blockchain (ledger) technology used to track ownership of the security token—the only aspect of this instrument that is unique—would not have a common distributed ledger. Rather, the distributed ledger would be exclusively available on BOX, thereby placing other exchanges at a competitive disadvantage that cannot be remedied by replicating the blockchain offering.”

The SEC Seeking Further Public Comment on BSTX Proposal

As a result, the SEC has postponed its decision in an effort to receive additional comments on the proposal. In particular, the SEC said it will further investigate whether or not BSTX is compliant with the Securities Exchange Act of 1934.

So far, the US has seen two platforms which compliantly facilitate security token trading as Alternative Trading Systems (ATSs): tZERO and OpenFinance. Both have seen a certain level of success, though not the level as was initially anticipated.

Security tokens represent the intersection of traditional financial securities and the blockchain. Though still an emerging technology, the process of tokenization is expected to bring significant benefits to the areas of initial issuance, secondary market trading, as well as clearing and settlement.

Many in the security token space feel as though regulatory ambiguity has hindered development. Whether or not any clarity will arrive in 2020 — is yet to be seen.

What do you think about the SEC postponing its final decision on BSTX? Should BSTX see approval? We want to know what you think in the comments section below.

Image courtesy of the SEC.

