The Token Generation Event kick-starts our tokenized ecosystem. However, it works differently from most ICOs and TGEs currently available in the market. The purpose of our TGE is to expand and improve our already operating Platform into a worldwide leading platform. We wish to introduce many Dedicated Token Offerings to our investor community that will represent value of shares in Target Companies, those that are already listed on our Platform, and those that will be listed soon after and to add additional companies from other fields of activities and other types of financial assets.
According to the principles of our Platform economy, the only way you can participate in Dedicated Token Offerings is to hold PECs. It should be noted that our working models may need to be modified or certain licenses may need to be obtained in order to enable PEC Holders from certain jurisdictions to participate in Dedicated Token Offerings.
The rationale behind creating our own token, the PEC, is that our tokens are security tokens that are intended to service the transactions on our Platform and around which we wish to build a large international community of Accredited/Qualified Investors. Only if you are cleared as an Accredited/Qualified Investor and join our community by holding the PECs, you will be able to enjoy access to investment opportunities available on the Platform; initially shares of the pre-IPO Tech Companies and then we intend on expanding our offering (i.e. non-tech companies, sports clubs) and allow more services on our Platform (i.e. analysis, management etc.).
In order to encourage Accredited/Qualified Investors to join our Platform we also intend to launch an Accredited Investor Recruitment Program and distribute PECs to investors that successfully complete their registration to the Platform. The Incentive Program will be available on our Platform and the number of PECs to be distributed will be limited in time and in number of PECs.
Security Token Revolution
As part of our business model, we issue the PEC, a security token that allows its holders to benefit from PrivatEquity.biz’s platform revenues, and tokenizing equity right in pre-IPO companies, through our Dedicated Tokens which are also security tokens.
As Initial Coin Offerings (ICOs) took the world of finance and investment by storm, there are currently over 1,500 different cryptocurrencies available. These range from Bitcoin, through IOTA, a cryptocurrency that is intended to facilitate transactions between devices on the Internet of Things (IoT), to PizzaCoin, a token dedicated to ordering pizza.
According to a report from Fabric Ventures and TokenData, ICOs raised over $5.6 billion in 2017. This compares to $1 billion of ‘traditional’ venture investing in blockchain startups in the same time frame. In 2016 $240 million was raised in ICOs.
Tokens are generally broken down into either utility tokens or security tokens. Utility tokens, often called app coins or user tokens, represent access to a company’s platform, product or service. Some have described utility tokens as comparable to API keys, used to access a service.
Another type of token is security tokens, which have the characteristics of securities as we know them at the traditional world, for example, equity right, voting right or profit sharing with the token issuer or other legal person.
In between, there are utility tokens that in spite of the fact that they do not fall within the characteristics of the abovementioned security tokens, may fall under the definition of securities under applicable securities law in the jurisdictions where they are being sold or distributed, mainly due to the fact that they create a reasonable expectation of profit and considered by their purchasers as an investment tool. Accordingly, these tokens should be treated as securities, even though they do not represent any equity right, nor include voting right or profit sharing mechanism, and create a significant exposure to their issuer in case it does not comply with applicable regulation.
In the United Stated, for example, Marco Santori, the President and Chief Legal Officer at Blockchain, addressed this issue by saying that an arrangement is a security if it involves:
“an investment of money…and a common enterprise…with the expectation of profit, primarily from the efforts of others”.
While originally, utility tokens were not designed as investments, and therefore, should have been exempt from most regulations, specifically securities law, the current environment and developing practice at the crypto space bring them to be considered as securities, especially in the US. The emerging secondary market, the use of token issuance as a fundraising tool and the fact that the value of the token depends on its issuer, bring most tokens issued today to a grey and risky status where regulators may consider them to be securities due to their perception as investment opportunities, even if that is not their official intended function.
PrivatEquity.biz security tokens aim to improve traditional financial products by removing the middleman from investment transactions, allowing investors to reflect their holdings with tokens, and easily buy and sell assets. This can lead to lower transaction fees, faster transfers, decentralization, transparency and more access for all accredited investors to invest rather than just financial institutions. Since security tokens are treated as securities from day one, complying with all applicable laws, this minimizes the risks and exposures for any unknown or unclear interpretation by relevant regulators.
Moreover, while most tokens currently available are utility tokens, many leading experts believe that this will shift soon, as the market develops and institutional investors invest in security tokens.
A main reason for the change is that issuing a compliant security token can reduce legal risk and provide protection for both the company and the contributors, and by doing so, allowing more traditional and conservative investors to take their first step in the crypto space.
The increase in platforms and companies related to security tokens is one sure sign that this market is on the rise and 2018 may be the turning point and the “Year of the Security Tokens”.