San Francisco-based startup, Securitize, which helps firms tokenize their securities and assets, is on the verge of buying broker-dealer Distributed Technology Markets (DTM) in a bid to enter more regulated markets and reach institutional investors.
Distributed Technology Markets is part of a family of companies and the acquisition will also include taking over its sister company Velocity Platform which runs a money services business with money transmitter licenses in several states.
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Pending regulatory approvals, the deal puts Securitize on a firmer regulatory footing with the Securities and Exchange Commission and positions it to offer a broader range of products, including blockchain-based securities. It also allows the platform to perform all operations in a regulatory compliant manner.
Securitize will also capitalize DTM’s regulatory approval to operate as an alternative trading system (ATS), which facilitates transactions in securities that are not publicly-traded. It creates a way for companies to tokenize equity and issue it on a blockchain without running afoul of regulatory obligations.
If approved, Securitize will soon be capable of offering blockchain-based securities, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
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“The acquisition of DTM will pave the way for Securitize to develop a suite of services for private capital markets that will significantly improve the interaction between issuers and investors and be better from top to bottom than anything available in the market today,” said Securitize CEO and co-founder Carlos Domingo.
Chris Wittenborn, CEO of DTM added, “There are enormous opportunities in private market securities issuance and trading. Partnering with industry-leader Securitize will allow us to capitalize on these untapped markets at scale.”
The deal also comes as the crypto-focused compliance platform, which has now raised nearly $30 million in total funding, is open-sourcing its Digital Securities (DS) Protocol. The company has also launched a new ecosystem, dubbed ‘Securitize Ready Program,’ that helps partners like lawyers, broker-dealers, and advisory firms to integrate its crypto compliance solutions.
Securitize’s DS Protocol provides an automated compliance platform for security tokens and ensure the whole process, from onboarding to issuance and investor management, is done within regulatory guidelines.
Many Fintech and blockchain firms have responded to US regulators’ classification of certain digital tokens as securities and therefore coming under the SEC’s supervision. Wall Street’s top watchdog says that any entity that wants to become an ATS needs to register with the SEC as a broker-dealer and become a member of a self-regulating organization, such as the FINRA.
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