In June, Bitcoin Magazine reported that e-commerce giant Overstock had become the first company to offer qualified buyers the option of purchasing corporate bonds that will trade using Bitcoin’s blockchain protocol. In July, we reported that Overstock CEO Patrick Byrne is interested in “cleaning up” Wall Street.
“We have started building things that replace what Wall Street does,” said Byrne. “It does them far cheaper, and with far more transparency, and without any of the opportunity for rigging.” Overstock’s platform, known as t0.com, applies the security and efficiency of cryptographically-protected, distributed ledgers to the world of finance. “T0's radical transparency and true settlement combine to grant real, unambiguous ownership – nearly instantly,” states the t0 website. “If you buy it, you own it. It's that simple.”
t0.com is an assumed name for Medici, Inc., which is a majority-owned financial technology subsidiary of Overstock. The Medici project was first announced by Byrne in 2014 at Inside Bitcoins Las Vegas. Overstock is a large online retailer based in Salt Lake City, Utah. The company, which went public in 2002 at an IPO price of $13 and now trades at $17, is likely to enjoy first mover advantages in the novel and very promising sector of crypto-securities. In fact, the crypto-stock exchange could sidestep traditional stock exchanges such as NYSE and NASDAQ and issue corporate stock directly over the Internet. T0 partnered with a number of banks, including the Industrial and Commercial Bank of China (ICBC), which Relbanks ranked as the largest bank in the world, to test its technology.
In July, Byrne said to expect further announcements about the t0 platform, and that it presents an “extraordinary opportunity” for Overstock because it has the potential to be disruptive.
Now, Overstock announced that it successfully completed another production beta test of its t0 software, by successfully using the bitcoin blockchain to record evidence of compliance with SEC Regulation SHO before a trader can engage in a short sale. Mandatory compliance with Regulation SHO, which was adopted to update short sale regulations, began in 2005.
Earlier this week, hedge fund Clique Fund, LP, participated in the t0 testing to purchase locates for all 30 Dow Jones Industrial Average stocks.
"The blockchain is the most important financial development of our lifetimes," said Byrne. "While others theorize about the innovations this new technology can usher in, t0 is taking action and proving the concept daily, including using it to crack open the notoriously inaccessible black box of securities lending. This is further evidence of the world-historical potential of distributed, cryptographically secured ledgers.”
Byrne added that, once up and running, each Pre-borrow Assured Token will provide the purchaser a valid locate satisfying the SEC's Regulation SHO requirements.
Pre-borrowed Assured Tokens (PATs) convert the rights to lend a third-party’s money into cryptographic tokens that are auctioned off at the end of the day, and reverse auctioned at the beginning of the day. PATs will be auctioned nightly in a Dutch auction using t0 software and the transaction will be recorded on the blockchain. Access to t0.com's PATs, when available, will be limited to qualified institutional buyers that are also qualified purchasers.
"As I have said publicly ad nauseam, I have no objection in principle with short selling when done legally," said Byrne. "Our introduction of the Pre-borrow Assured Token will solve a problem for the beneficial owners, by bringing their inventory into a transparent market; it will solve a problem for the short seller, who will be able to borrow in a transparent market; and it will solve a problem for regulators, who for several years have taken a more aggressive stance regarding this mischief than they did a decade ago, I feel obliged to acknowledge. Unfortunately, a few bad apples spoil the barrel. That barrel needs a good scrubbing, and that's what our Pre-borrow Assured Token will do."
It appears that Overstock’s t0 platform is advancing steadily toward fully operational status, and could have a big and disruptive impact on securities trading.
“We have started building things that replace what Wall Street does,” said Byrne. “It does them far cheaper, and with far more transparency, and without any of the […]