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The Neon Exchange security token, NEX, has been officially classified as a security by regulators of the Financial Market Authority (FMA) of Liechtenstein. While the unprecedented mandate has obvious benefits, the implications are significant for the entirety of the digital assets market.
The first and obvious benefit entails the Neon Exchange finally having the green light to raise funds from public investors. While this may sound simple, it hasn’t been for the Neon Exchange, a project known for its long-term vision and desire for legal compliance— something virtually unknown to the tokenization of securities. In fact, the issuance of NEX— Europe’s first regulated security token of an exchange— took dozens of lawyers and several legal firms with various specializations an entire year to gain approval.
There are many other advantages that come with the issuing of NEX. These can include benefits such as “protection against market manipulation, fraud, and insider trading. Perhaps most importantly, it allows us to pay our investors dividends through fees taken by the exchange, a form of profit sharing,” said Ethan Fast, NEX co-founder and CTO.
Fast also described the vision of NEX, to include its high standard for legal compliance. Their team believes that every single exchange token is a security, and if exchanges decide to stray away from securities legislation or anti-money laundering laws, a major risk is imposed on investors— something that Neon Exchange wants no part of:
In our view, [non-legal compliance] poses a major risk to investors, as these platforms may suffer harsh consequences when the laws are eventually enforced. When facing these issues we decided to take the route that would bring the most value to investors with the least legal risk.
The most astounding consequence of the recent NEX approval as a security is the result that it can be listed on any conventional European securities exchange. But even this isn’t enough to satisfy the team behind Neon Exchange.
Their short-term aim is focused on the acquisition of a Security Dealers License, which would allow them to issue other securities to public investors. Such a license is also required for an Organized Trading Facility License, something which would support the further trading of NEX along with other European securities.
In the long-term, they wish to receive a Banking License, which can allow the NEX team to operate regulated bank accounts and to store customer money. It will hopefully lead to additional services such as index funds and margin trading.
When it comes to the United States, they have their eyes set on Broker Dealer, ATS, and FINCEN licenses, which would enable the trading of US securities.
Ultimately, the significant progress made by NEX is seen by many to serve as a successful model from which others can follow.
“Given the precedent we have set, other companies will find it much easier to issue security tokens in these markets,” said Ethan Fast.
What will be the full impact of the progress made by NEX? Will they lead the much-desired path to feasible regulation of securities tokens? Let us know what you think below!
Image courtesy of Blockchain News.