By Staff Reporter
While security token offerings, a digital representation of traditional securities, are widely hailed as a next big thing in the application of blockchain in finance, there are few recognizable standards in the market yet.
The total market for security tokens is estimated to be around $500 trillion, with investments in the new asset class having already exceeded $500m in 2018.
The lack of standards might set the stage for a crisis of interoperability, laments industry experts.
There are, however, efforts underway to create common, interoperable guidelines that could help drive the securities token towards mainstream adoption.
One such initiative is the Millbrook Accord, which was recently unveiled by a consortium of a blockchain industry leaders who met in Millbrook Resort, Queensland, New Zealand to create an open-source platform known as Verified Token Framework (see here).
The founding members include Gibraltar Stock Exchange (GSX Group), tZero, a security token exchange, SharesPost, a broker-dealer for private companies, blockchain firms, Techemy and NEM.
The primary purpose of the Millbrook Accord, according to the statement, is to “put forward practical solutions in order to facilitate a more seamless process for verifying identities, navigating jurisdictions, and ensuring compliance among token holders, exchanges, and platforms.”
“In order for the security token movement to grow, companies need to agree on an unbiased standard,” said Saum Noursalehi, chief executive of tZERO.
NEM will serve as the first non-Ethereum based blockchain implementation of the VTF through its protocol features, making the VTF the first formalized collaborative effort for security tokens to date.
The VTF framework, he said, is “a step toward ensuring that digital assets are interoperable and that the unique challenges presented by security tokens are addressed.”
It will provide leading industry guidelines on security token interoperability, and aims to become the foremost reference document, codebase, and community for the security token ecosystem. The core VTF codebase itself is open-source.
The Millbrook Accord will hold quarterly bake-offs around the world, with the first being scheduled to be held in New York City.
Jeff Pulver, Chairman of the Blockchain Token Association, believes that a collaborative effort is needed to create open source set of standards to pave way for the acceleration of blockchain adoption and the maturation of the global security tokens ecosystem.
The VTF codebase will include various regional compliance and feature requirements for security tokens.
Fran Starjnar, chief executive of Techemy, said: “Tokens issued by various groups will be incompatible between blockchains, within market participants, including the exchanges that will list them, as well as the custodians and broker-dealers (sic) who will handle them.”
He believes that the Millbrook Accord will help overcome what he believes is the looming crisis of interoperability in the security token industry.