Security token firm Securitize is trying to become a broker-dealer and alternative trading system for digital assets, the company announced Thursday.
The firm signed an agreement to purchase Distributed Technology Markets (DTM), a broker-dealer and alternative trading system registered with the U.S. Securities and Exchange Commission (SEC) and the U.S. Financial Industry Regulatory Authority (FINRA).
As part of the acquisition, Securitize will also acquire Velocity Platform, a money services business with licenses in several states. Both DTM and Velocity Platform are owned by parent company Velocity Markets. Securitize added these registrations to its status as a SEC-registered transfer agent in the digital asset space.
The deal is pending regulatory approval and the terms of the deal were not disclosed.
“We felt that an acquisition was the faster route with less uncertainty,” said Securitize CEO Carlos Domingo. “This will allow us to create a marketplace for secondary trading of private securities.”
Broker-dealers in the U.S are able to buy and sell securities, both for themselves and for their clients, while alternative trading systems facilitate the trades. In 2019, FINRA sat on dozens of broker-dealer applications for months, reportedly at the SEC’s request.
For a while, Securitize had assumed it wouldn’t have to create its own marketplace for security tokens because of how many companies planned to become broker-dealers for the space, Domingo said.
Securitize has spoken with at least 40 companies in the security token space who have folded or not launched their projects because a lack of understanding of the sector’s regulatory complexity, he added.
Prior to the acquisition, Securitize was using security token trading platform Openfinance as its ATS, but in April the company threatened to delist tokens and suspend trading unless issuers could cover more costs.
“There’s no reason to believe that someone else is going to be able to create an effective secondary marketplace [for security tokens],” Domingo said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.