Securitize Increases its Client List By 6x with Latest Acquisition
Three years after becoming a SEC-registered transfer agent, Securitize continues to expand. As of February 16th, the securities-tokenizing firm acquired Pacific Stock Transfer.
What are Transfer Agents?
Like Securitize, the newly acquired firm is also a regulated transfer agent. The job of these companies is to distribute dividends to investors, record securities ownership changes, cancel and issue share certificates.
In other words, transfer agents are mediators between companies issuing securities and security holders. As such, they are critical for the stock markets. After all, a stock share is just another type of security providing holders with fractional ownership of a publicly-traded company.
Pacific Stock Transfer has been focused on serving small-cap companies. Now absorbed, Securitize became one of the top 10 US digital transfer agents holding 1.2 million investor accounts for over 3,000 private and publicly traded companies. Carlos Domingo, Securitize’s CEO, sees this move as a big step forward in tokenizing a wider range of companies.
“This acquisition is a big step forward for Securitize in significantly increasing our ability to introduce new capabilities to more companies, as well as for the financial services industry in general with this major step in building and broadening a ‘blockchain bridge’ from a paper-based past to a digitally native future.”
In this vision of the future, Securitize handles multiple complex layers of stock issuance. This ranges from tax reporting and voting shares to ownership and shareholder communication.
What Does PST Bring to Securitize’s Table?
As a bridge from securities to the Algorand blockchain network, Securitize has been on the Tokenist’s radar many times. In June 2020, Securitize reached its first major milestone by tokenizing royalty payments for Lottery.com. The first of its type, it was marked as a significant modernization of capital markets. Although securities are handled electronically, that doesn’t make them into digital assets.
Securitize (securities + tokenize) makes them into digital securities and then gives investors an expanded range of management options with its open-source DS Protocol. From that end-point, investors can raise capital, issue tokenized shares, and provide liquidity for secondary market trading, in which traders acquire securities from other traders instead of companies.
Pacific Stock Transfer clients will now have those options at their disposal. Having been around for 38 years, PST already specialized in making client transactions efficient and compliant. It gained such a reputation by implementing the Depository Trust and Clearing Corporation (DTC)/FAST service. The latter stands for Fast Automated Securities Transfer Program (FAST).
You may remember FAST as a retail trading option in the wake of GameStop short squeeze. With the stock market exposed as unreliable, FAST agents, like PST or Computershare, keep shares in the name of traders, using DRS – Direct Registration System. The same cannot be said of brokerages like Robinhood.
Blockchain-based record keeping will level up that efficiency even further. Moreover, PST represents a six-fold increase of Securitize’s 450k investor accounts, alongside a three-fold increase in the number of shareholders Securitize serves.
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Securitize Funding Roundup
One year after its founding, in November 2018, Coinbase and Ripple invested $12.75 million in Securitize to keep tokenizing the $7 trillion worth securities sector. After two years since its founding, in 2019, Securitize raised just over $30 million.
That year also represented a milestone as the company acquired Japanese BUIDL, a blockchain startup giving Securitize a foothold in the Asian financial market. Fast forward to June 2021, JPMorgan and Blockchain Capital raised $48 million in another Series B fundraising round. Overall, the cutting-edge FinTech firm raised a total of $87.5 million across 8 funding rounds.
With many more securities to tokenize, both Algorand and Securitize are poised to receive even more traffic in the upcoming years.
Do you think all shares should be recorded on a blockchain to provide transparency, so there is no hint of collusion between brokers and market makers? Let us know in the comments below.