Blockchain Milestone: Selling Tokenized Equity Made Easy
Three startups achieved something that might be one of the true game-changers, born out of the blockchain technology: Tokenized equity, obtainable instantaneously through a ‘Share Dispenser’ built on the blockchain. We talked to Tim Glaus, Co-Founder and COO of Alethena, to learn more about the revolutionary approach to selling shares.
What’s the game-changing advantage of shares on the blockchain?
From a company’s perspective, tokenized shares enable the inclusion of a new investor segment, lower issuance fees, enhance tradability, and unlock the so-called liquidity premium. Moreover, tokenization allows for enhanced employee incentives with respect to employee shares and facilitates access to capital markets. From an investor’s perspective, shares on the blockchain grant enforceable rights and facilitate the participation in small- and medium sized companies by allowing for smaller investment sizes and lower costs, thus improving the diversification potential.
Organizations and companies such as Swisscom, Deutsche Börse or SIX are also working on similar projects. Why should interested SMEs tokenize their shares with your solution and not wait for the established companies to launch their service?
Many players in the market are currently working on tokenization solutions, a development which we consider highly beneficial to the ecosystem as a whole. For this reason, Alethena supports this movement and our vision is to see as many companies with tokenized shares as possible in the near future. A key element of Alethena’s strategy is to use an open approach whenever possible. In practice this means using public blockchains (e.g. Ethereum), maintaining open access for users and minimizing frictions such as restricted tradability through whitelisting. Beyond tokenization, Alethena offers SMEs its so-called “Share Dispenser” solution which enables companies to offer their shares directly to investors on their website, thus creating a primary market. Moreover, with an additional buyback option, companies can also offer a secondary market for their investors, solving the illiquidity problem that many firms and investors face in the market.
Now that you have successfully launched it with @Alethena as the first use-case — What’s next for the share dispenser?
Last week we released the aforementioned “buyback” feature, allowing companies to essentially set up a secondary market for their shares. Currently we are developing new solutions, aiming at solving long standing problems in regard to shareholders’ agreements, squeeze-out and tax issues as well as insider trading. At this point we are also onboarding new use-cases and we look forward to discussing our solution with interested companies.
Definition ‘Tokenized Equity’
Tokenized equity constitutes a framework where each token represents a share in the underlying company. It represents a legal relationship in which the holders of tokens are endowed with enforceable rights (voting and/or dividend rights) by holding the corresponding tokens. Tokenized equity thus bridges the gap between the existing law doctrine and the progressive blockchain technology.
Fundamental Legal Principle
The fundamental principle of tokenized equity is constituted/shaped by a re-interpretation of the current legal doctrine by well-known scholars in Switzerland (von der Crone, H.C., Kessler F. J., and Angstmann, L, 2018, Token in der Blockchain — privatrechtliche Aspekte der Distributed Ledger Technologie, Schweizerische Juristen-Zeitung), which now makes it possible to offer fully tokenized equity with enforceable dividend and voting rights (in Switzerland). In essence, registered share tokens qualify as uncertified securities (as defined by Art. 973c OR or extra-legal). Given uncertified securities are pure obligatory rights, in principle, this allows for an application of the common rules of the Swiss Code of Obligations (as opposed to the law on securities). Therefore, this makes possible both the integration of tokens into shares and the transfer of these tokens.
In the case of the Alethena Share Dispenser, the names and addresses of the shareholders are kept in a traditional shareholder registry hosted by Ledgy.com. The legal setup for the Share Dispenser was done by Lexr.
Tim Glaus holds a Bachelor degree in Business Administration, a Master in English Languages & Literature as well as a Masters degree in Economic Sciences. Over the past 7 years, Tim has gained valuable experience in banking and asset management and has been actively involved in building up and running different startups. He has a great interest in private equity investments and disruptive technologies and co-founded Alethena in 2017.
Alethena is a Swiss fintech company specializing in blockchain applications and digitalisation that offers technological solutions in the area of tokenisation of company shares and their tradability.