London firm Globacap plans to become the first company to issue equity securities via a public blockchain with approval from the Financial Conduct Authority, the UK’s financial watchdog. It will begin by selling its own securities.
An equity security is a financial holding with monetary value that represents some kind of ownership share in a given entity (as opposed to a debt security, which represents money that is to be repaid).
Globacap wants to use blockchain technology to allow small and medium-sized businesses to sell shares to investors around the world. It is aiming for this market because it accounts for 67 percent of all private sector employment, according to the press release.
Investors are wary of the ICOs of certain SMEs because they are not regulated; according to its official introductory video, Globacap is solving this problem with a new financial instrument called a ‘digital equity security.’
These are tokens which form a “legal shareholding within UK company and securities law.” According to the press release, Globacap has worked with legal advisors to ensure legality. This means that investors and businesses must fully register with the company
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It works with the FCA, so it “guarantees full compliance.”
The company opens its doors in five days time with a fundraising drive for itself, which will also function as a test. It will be working within the confines of the FCA’s sandbox.
A sandbox is a kind of quarantine in which companies can test their products without worrying about adversely affecting the economy or inadvertently breaking the law. The FCA has been running a sandbox since June 2016. Its latest six-monthly induction is called ‘cohort four’, and it has received applications from 69 companies, with 40 percent of them using blockchain in some way, according to Mortgage Finance Gazette.
Globacap will be selling its own equity in the form of a crypto-token. The digital security offering is meant to ensure that investors receive a return for their money, which is often not the case with unregulated ICOs.
It will be selling 15 million GCAP tokens, which will function as regular shares do.
Myles Milston, Globacap CEO, said: “This is transformative to the securities industry, paving the way for small and mid-sized businesses to more efficiently access a wider pool of global capital. The Innovate team at the FCA have been pivotal in this milestone, allowing us a quicker route to launch our proof of concept while having regulatory oversight.”