Jeff Ramson, the CEO of PCG Advisory Group, explores the question that has been buzzing around the tokenized security space: are digital securities private or public?
Generally speaking, the transparent, public ledger is viewed as being one of the strengths of blockchain technology. However, when it comes to those most accustomed to traditional finance, those investing in securities might not want to have their assets visible on a public chain. On the other hand, platforms like AirSwap are pushing for compliant security token transfers on a public chain like Ethereum. In short, the security token space has to decide how it will resolve the privacy question.
Although many other platforms have emerged to facilitate security token issuances, one of the remaining questions is: will security tokens have to exist on a private chain? Even more complicated, how do we square the contradiction between being a “private” company and needing to raise capital with a “public” security token offering?
The Current Problem of Raising Capital
Jeff Ramson, the CEO of the investor relations firm PCG Advisory Group, writes in his blogpost that: “The great majority of companies doing STO’s and Reg-D offerings I have met with and worked with consider themselves private companies. Technically that is correct — at least for now.”
He goes on to write:
But this begs the big question: If you are a “private company” but selling the vision of liquidity on an exchange, how do you plan to create such liquidity amongst a very narrow group of accredited investors?
This is a discussion worth having. After all, liquidity comes from “scaled participation.” If we want to allow for the largest pool of capital available to companies, we will have to develop the proper channels for both private and public companies. After all, increasing liquidity is one of the ultimate promises of tokenization. The liquidity concern will not be resolved until the “public or private” question is answered. There may, in fact, be space for both options if the regulatory environment changes.
What do you think of the public v. private dilemma? Let us know your thoughts in the comments.