Blockchain Platform for Trading Securities OTC Gets SEC Approval
A Delaware-based company, BlackStar Enterprise Group, has received approval from the United States Securities and Exchange Commission (SEC) to carry out over-the-counter (OTC) stock trading on its blockchain platform. The SEC and the Financial Industry Regulatory Authority (FINRA) will become Certificate Holders in the private blockchain, allowing regulators to view transactions and access network governance.
BlackStar has been developing its platform since 2018 and has gone through an extensive communication process with the SEC, answering questions and comments from examiners. The company recently submitted a detailed plan to the SEC Trading and Market division outlining how its platform will be operated.
BlackStar CEO Joseph Kurczodyna stated that the company sought permission from the SEC to build the platform’s demo in 2018 and has since proven that U.S. registered securities can be traded digitally on a blockchain while remaining compliant with broker-dealers’ back-office and SEC rules.
The platform will allow trading of OTC securities within the existing regulated brokerage ecosystem from the FINRA and SEC. According to the company, customers will continue to use brokerage accounts and broker-dealers, and the transfer agent will maintain shareholder records. Custodial duties will remain the same as the platform passes encrypted customer information for buy or sell orders to the appropriate parties.
The BlackStar platform is built on a private blockchain powered by Amazon Quantum Ledger Database and will remain in the testing phase until licensed to a broker-dealer, clearing firm, or Alternative Trading System (ATS). The SEC and FINRA will become Certificate Holders in the blockchain upon approval, with full access to transactions. However, tokens, crypto assets, and short selling transactions will not be supported on the platform.
BlackStar CEO Kurczodyna believes that the platform’s approval is an exciting development that could potentially resolve existing trading issues, increase transparency, and mitigate risks of investing in OTC stocks. He sees the platform as a way to address concerns related to fraud in the U.S. financial markets.
Germany is also undergoing a similar development, with the government aiming to use blockchain technology to power stock trading. Recently introduced legislation in Germany targets the digitalization of capital markets through the issuance of electronic securities on a blockchain, with the goal of making stock markets more accessible to startups and small businesses.
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