Due to the regulated nature of Security Token Offerings (STOs) and ever since we saw scams that ripped-off investors money through Initial Coin Offerings (ICOs), STOs are on the rise and many experts in the cryptoverse term 2019 to be the dawn of the STO movement. It is true that STOs gave the blockchain industry a new direction towards a legal structure, giving rise to some successful STO issuance platforms like Polymath and others.
Token IQ is one such STO platform, helping different entities tokenize their assets. Director of Strategic Relationships of Token IQ, Ben Wilkening talked to BlockPublisher about how the platform works and how it solves token recoverability.
What is Token IQ
Ben: “Token IQ is an STO Issuance platform designed to create a digital stake of any desired securities instrument. Our vision is that the entirety of the world’s assets will be tokenized, and thusly so, our SaaS platform can take any asset and immutably represent the ownership rights, KYC data, audit trail and more, all on our distributed ledger, built on the Stellar network. Most importantly our custom fork is informed by legally representative patents which govern transactions on these vectors with true SEC compliance law. Stellar is quite unique in that it basically allows for turning on and off trust lines to reconcile transactions whose funds originate from many of the established ‘anchors’ on the Stellar system. One such organization, AnchorUSD, along with others, have achieved FINRA approved operability and allow investors and issuers, to treat them as an entry point to circumvent a bank and directly input funds. The great thing about Stellar is that the incremental transfer of ownership can be represented on the ledger basically free. As you may have guessed, it is because of these unique functionalities that we had the flexibility to enable the features we designed, which are maneuvers that smart contracts can simply not perform; and means STO platforms designed on ERC-20 or similar infrastructure do not match the level of compliance we enjoy.”
How Token IQ Works
Ben: “Token IQ is a software platform that removes barriers to participation in investment offerings and instead provides an access path to a pool of interested entities, which is exponentially larger than those which traditional issuance authorities have access to. Because of its in-line design with governance regulations and performance automation of executed procedures, tasks like: onboarding, authentication, validation, market making functions, payments, and more, all happen on chain within the token wallet ecosystem and are all checked and reconciled by legal logic to process any function a securities instrument might take. An example of what one can do is represent one-to-one value on the actual ledger, when using one of the aforementioned ‘anchors’. A prime example of this put into practice is the online DLT interface, Stellar X, which is actually a distributed marketplace that allows the input of dollars directly onto the ledger and converts them to a dollar format which is compatible with purchasing offering. One can even buy ERC 20 tokens with Stellar on that platform but this is just an example of how one-to-one works. In short, anyone can now take dollars and put it into the system and use that dollar to buy an offering from a desired issuer. That dollar is recognized on the ledger and if one has tokens, they can just exchange those for the requisite value. That being said, this was surely a convenience factor which empowered several of our designs, but what really sets our solution apart from the crowd, is that we invented functionality which catered to the SEC’s steadfast dictum that true securities tokens also must have an aspect of recoverability built in (in case the true owner is to lose access to the private keys). In the smart contract realm, there is no action anyone can perform which will recover tokens. If someone loses their password, they are out of luck. This is one of those glaring things that the SEC still looks to solve and this is why they keep pointing to the regulations. They have not changed anything because the laws are sound and that is what they are pointing to.”
“We are a technology company that operates within the confines of the law and we made these tokens recoverable. If the password is lost to access the wallet, we give the issuer one-time authority, under court ordered affidavit, to reissue those tokens with fresh ownership credentials. The classic scenario of a last will and living trust needing transference is now something that, using Token IQ tech, can be facilitated for. If a man dies, the wife would still own those tokens. Just like any other property, she can take that to the court and the court will compel the issuer to transfer them to the new owner, the wife.”
How Token IQ is Different From Competitors
Ben: “Most importantly, the recovery of tokens we’ve discussed is what truly sets us apart. With this in place custodians, transfer agents, exchanges, and more can now work with a partner like Token IQ who alleviates the risk burden that has plagued ICOs and early STOs. Additionally, since transacting is so compliantly direct across the Stellar vectors, there is no need to swap into Ethereum first to buy a token. The SEC does not have a regulation that knows how to handle the typical workflow to buy ERC 20 tokens. There is no law that covers the transaction of one token to another and there is also no set boundary around transaction time. It is really important to get instantaneous direct transmission and Stellar is the perfect platform for that. We are of the firm creed that because of the protections and features we’ve put in place, entities looking to securitize real estate, funds, cars and collectibles will rapidly find Token IQ’s platform to be exactly the tool needed to undertake efficient, compliant raises.”
The content is updated on 15th February 2019, due to some changes requested by Token IQ about the working of their platform