05 July 2019
On 1 July 2019, the Barbados Stock Exchange (“BSE”) received approval from its primary regulator the Financial Services Commission for the launch of its Special Listing Facility for Digital Assets (the “Special Listing Facility”).
The Special Listing Facility operates through the BSE International Securities Market and establishes an adaptable and responsible framework for raising capital in the context of an emerging and dynamic asset class: digital assets. The attribution of economic value to ‘digital assets’ has been accelerated by their relevance in the context of blockchain technology, where cryptocurrencies are often used to incentivise and reward participants in a blockchain network.
The guidance note relating to the Special Listing Facility defines the term “Digital Assets” as:
“a cryptographically secured digital representation of a set of rights provided on a digital platform issued or created (or to be issued or created), for commercial exploitation or reward, and which are exchanged and traded or cleared on a network of inter-linked and secured decentralised digital records (blockchain).”
The guidance note further clarifies that the Special Listing Facility “…is intended to extend to all such Digital Assets, irrespective of the nomenclature used and whether described as security tokens, utility tokens, payment tokens, cryptocurrency, crypto-assets, coins, programmable security, smart security or otherwise, and is not intended to exclude any specific set of rights or asset which is within the compass of the definitions of the rules of the Special Facility”.
Why is this important?
The tokenization (or digitization) of assorted securities and offerings of security tokens (“STOs”) has attracted significant levels of interest amongst legacy financial players globally, not least because of efficiencies arising from the automation and streamlining of certain processes.
The tokenization of assets essentially refers to the conversion of an asset into a token (or digital representation of value) that can be identified, recorded and transferred on a blockchain network. The process of converting assets to a representation of value on an immutable and cryptographically secured digital ledger offers inherent value from a number of perspectives, including custody, transfer and fractionalization of cumbersome tangible asset e.g. precious metals or real estate.
STOs are being heralded as an alternative future of fund raising, and are an evolution of initial coin offerings to the public, which raised unprecedented amounts of capital outside of traditional financing models in the period 2014 - 2018. They represent a progression to regulatory certainty and clarity, given that many global regulatory bodies appear inclined to treating initial coin offerings to the public, as offerings of securities - thereby triggering the application of regulatory requirements.
The launch of a Special Listing Facility for digital assets in Barbados is therefore timely and underscores the jurisdiction’s commitment to keeping pace with the global game.
© FT Legal 2019