Ravencoin — A Securities Token Roadmap

Tags and Restricted Assets were adopted on the Ravencoin network on February 7th, 2020 at 6:15 EST. It was up to the Ravencoin network participants to adopt the changes. This was the culmination of two years of hard work and pulls together the final pieces of a very elaborate and significant puzzle for Securities Token Offerings (STOs).

Ravencoin — Asset Issuance Platform
  • Tags — Tags are needed so that the movement of Restricted Assets can be restricted to only those addresses that are properly tagged. Tagging can be used for things like KYC, Accreditation, Affiliation, and limits on the number of addresses that can hold tokens.
  • KYC Platform — A trusted KYC/AML/OFAC entity that is so good and has such great policies that others can rely on the platform to satisfy their compliance obligations. Finclusive has developed a service that will integrate with the Ravencoin platform to satisfy these requirements.
  • Freeze (by asset/address) — This is required for Security Tokens to prevent their movement in the event that the holder is found to be a “bad actor”. This is a compliance requirement. Another use for these features is for Rule 144 restricted stock.
  • Freeze (by asset) — This is required for Security Token movement to be completely frozen for a given asset. This is also a compliance requirement.
  • Memos — This allows any transfer, freeze, or tag to have additional immutable metadata identifying the reason. This can be used for normal operations like Rule 144 restrictions, or for extraordinary events like seizure under a court order.
  • Dividends or Payments — This allows the payment of profits, royalty stream, or contractually obligated payment to asset holders who are properly KYCed.
  • Voting — This optional feature allows equity token holders to vote their shares by sending vote tokens to specific addresses.
  • Messaging — This allows the reporting of material information to the token holders. It can also be used to inform the token holders of an impending vote.
  • Reg S — Selling only to non-U.S. citizens that are not in the U.S.
  • Reg A+ (Tier 1) — Sell to the public up to $20 million. Requires filing with state securities agencies.
  • Reg A+ (Tier 2) — Sell to the public up to $50 million. Requires SEC “blessing” of disclosures.
  • Reg Crowdfund — Sell to the public up to $1,070,000. Limits per investor, generally 1-year resale restriction.

KYC

The other thing about securities is that every security token holder needs to be known. This requirement is largely hidden from the public and is usually handled by a bank, or a broker-dealer such as Schwab, Fidelity, TD Ameritrade, etc. The compliant crypto-exchanges have pushed this KYC (Know Your Customer) requirement into the limelight as they now ask for name, birthday, and photos of your id.

Issuing security tokens

This can be done in under a minute by the issuer using the Ravencoin-Qt wallet. With 1500 RVN + 0.01 RVN for miner fees, create the unique Restricted Asset name that represents the security. Include legal documentation and disclosure information relating to the security by putting a disclosure PDF into IPFS and include the IPFS hash when issuing the token. Set the token qty, and set to re-issuable. Set the Rule to “#KYC_F” to restrict the token to only KYCed addresses.

Rule 144

Rule 144 requires that some shares owned by folks that are affiliated with the company can’t be traded. The Ravencoin Restricted Assets can be frozen by address (individually), with a memo that specifies the reason. This is the digital equivalent of a legend on a stock certificate.

Freeze or Seize (Court ordered)

In the rare event that a security token must not be used, an individual address’ security token can be frozen and marked (via memos) as lost or seized such that the issuer will not redeem or honor those tokens.

Secondary Market (Trading and Liquidity)

Once a token is allowed to be sold, it is important to make sure that any token that is considered a security token as determined by the Howey test, is traded on a venue that is properly licensed and regulated. There aren’t very many of these in the U.S. yet. Eventually, there will likely be many choices, but currently, tZero ATS, an SEC-registered broker-dealer that operates an alternative trading system, is a good choice.

Ravencoin Ecosystem

As more tokens are issued on the Ravencoin platform, an ecosystem will develop of verified and accredited investors that can invest in additional tokens with a minimal amount of additional verification.

Frequently Asked Questions

Q: Can the issuer change the rules for a token?

More Reading

Freedom advocate, crypto developer, businessman, entrepreneur, and lead dev for Ravencoin — a top crypto-currency and asset issuance platform.

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