Photo by Patrick Fore on Unsplash

Anyone familiar with the blockchain and cryptocurrency space has heard of an Initial Coin Offering (ICO).

ICOs have become so numerous that government regulators are analyzing the securities implications of this fundraising method.

ICOs that violate securities laws could soon face penalties or graver consequences.

This is nothing new…

For centuries, securities have endured cycles of increased regulation and deregulation.

For example, at the beginning of the 1920s, many companies sold securities with a promise of large profits. Sometimes, the evidence to back this up proved to be downright fraudulent.

After the 1929 stock market crash and the subsequent Great Depression, the Securities Act of 1933 and the Securities Exchange Act of 1934 were introduced to regulate securities offerings.

The SEC (Securities and Exchange Commission) was formed in 1933 to enforce these new regulations in the primary and secondary securities markets.

The Dodd-Frank Act of 2010 introduced more sweeping reforms to the securities landscape, but compliance costs increased dramatically, and the reporting requirements faced by businesses have kept even some large tech firms out of the public market due to inflated costs.

Since then, the world has witnessed the emergence of blockchain technology — an immutable, decentralized ledger that eliminates middlemen, complex auditing systems, and long settlement times.

The most popular blockchains, like Ethereum, are decentralized and less susceptible to hacking and corruption since network security is maintained by thousands of independent nodes.

The Polymath system is built on Ethereum and utilizes smart contracts that can transfer assets and establish escrow conditions algorithmically. Its native token, POLY, is an ERC20 utility token.

While tokens representing the sale of products could potentially be exempt from the Securities Act in the US because they are considered utility tokens, securities tokens represent an equity stake in an organization or a claim to the wealth generated by its activities.

Services in the Polymath system are paid using POLY to keep all network participants incentivized to trend towards good behaviour.

Although it will be securities tokens (ST20) created and traded, POLY is used to pay for products and services on the Polymath platform; KYC (Know Your Customer) services, investing in securities tokens, engaging legal delegates, and raising funds.

Developers create Security Token Offering (STO) contracts, legal delegates help issuers complete their token issuance, and KYC providers verify your identity and eligibility to participate in an STO.

With the multi-trillion-dollar securities industry stampeding toward the blockchain, Polymath allows individuals and companies to participate in valuable blockchain-based asset ownership and investment opportunities.

From creation, to fundraising, to liquidity, Polymath guides issuers such as venture capital firms, investment funds, and public companies through the complex tech and legal processes of a successful securities token creation.