Overstock's tZERO is working to obtain regulatory approval to trade blockchain-based and traditional stocks on its app exchange, tZERO Crypto. Announced Thursday April 30, the plan will guarantee tZERO Crypto users access to cryptocurrency, security tokens and traditional stock trading on a single platform, a regulatory venture that they have not yet accomplished. Overstock's security token trading branch hopes to become the first to implement this plan.
The tZERO plan
tZERO Crypto is the tZERO unguarded exchange app that supports bitcoin, ethereum and ravencoin. It is currently separate from the tZERO digital securities trading platform, known as the tZERO Alternative Trading System (ATS).
The securities that tZERO wants to trade are still registered on a traditional central register, but a blockchain platform is used as a backup record.
By connecting the rapidly growing but relatively poor tZERO Crypto user base - the app had 6.404 accounts in the first quarter, a 40% increase over the previous quarter - tZERO ATS would potentially increase liquidity in a security token market that strongly lacks daily trading volume.
The tZERO Crypto trading platform would operate on a subsidiary broker-dealer yet to be approved, tZERO Markets. The company's CEO, Saum Noursalehi, had previously thought of launching the tZERO Markets in the first half of 2020, gaining approval in the second quarter - "but you can never be confident with the regulators."
"Once regulatory approval is received, our app will exchange cryptocurrencies, security tokens (including TZROP and OSTKO) and traditional securities," said Noursalehi.
Promote the growth of security tokens
Linking tZERO Crypto to tZERO ATS is one of many user acquisition strategies. Previous growth actions seem to work.
Among these is the most striking of Overstock: a new digital security dividend for shareholders, which is part of a plan - designed by former CEO Patrick Byrne - to connect thousands of Overstock shareholders to the tZERO ATS by making them woo on Dinosaur Financial with a corporate security token, OSTKO.
Noursalehi said that "Dino saw a significant increase in investor onboarding" before the dividend payday of May 19, but declined to declare the exact number.
Dino is the only approved broker-dealer to perform tZERO ATS among the six subscribed broker-dealers. The digital dividend pushed new broker-dealers to move closer to tZERO ATS, said Noursalehi.
He said tZERO is in talks with around 100 broker-dealers. tZERO bets that it can bring more Investors on their ATS by giving them multiple digital securities to negotiate. Currently only two tokens are listed, but a third is pending regulatory approval and around 200 other companies are in "late stage" negotiations to issue digital securities with tZERO ATS.
COVID-19 has slowed tZERO's march. Noursalehi said that coronavirus and the resulting market volatility made new issuers reluctant to invest until trading resumes a more regular dynamic.