A Delaware company is while searching registration with the United States Securities and Exchange Commission (SEC) to conduct over-the-counter (OTC) equity trading on-chain.
BlackStar Enterprise Group has been developing the platform since 2018 and spent nearly two years in communication with the regulator, responding to dozens of questions and comments from reviewers. Recently, the company took the next step by providing a detailed plan to the SEC Trading and Market division on how its platforms will operate.
BlackStar CEO Joseph Kurczodyna told Cointelegraph that he sought clearance from the SEC to create the platform’s demo in 2018. “The rules,” the senior executive commented.
The platform will allow OTC securities to be traded within the existing Financial Industry Regulatory Authority (FINRA) and SEC regulated brokerage ecosystem, the company said in its filings. As stated in the document:
“For example, clients will continue to use brokerage accounts and brokers and the transfer agent will continue to maintain shareholder records. (…) All custodial obligations are intended to remain the same as the platform will transmit encrypted client information to buy or sell orders to the appropriate parties.”
According for Investopedia, OTC refers to the process of trading securities through a network of brokers, rather than through a centralized exchange such as the New York Stock Exchange (NYSE).
BlackStar’s platform is built on a private blockchain and powered by the Amazon Quantum Ledger database. Kurczodyna said it will remain in the testing phase until it is cleared to a broker, clearing company or alternative trading system (ATS).
Upon approval, the SEC and FINRA will become certificate holders in the blockchain, with full access to transactions. Tokens, crypto assets and short sale transactions will not be supported on the platform.
“From a timing perspective, we believe this is an exciting time for BlackStar. Our proposed digital trading platform (…) could potentially help solve several existing trading issues, including issues related to the fraud in US financial markets,” says Kurczodyna, who believes the platform will increase transparency and mitigate the risks of investing in OTC stocks.
A similar development is taking place in Germany, where the government wants to use blockchain technology to power stock market transactions. Recently introduced legislation aims to digitize capital markets through the issuance of electronic securities on a blockchain, aiming to make stock markets more accessible to startups and small businesses.
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