Topic: legal aspects of decentralized capital markets - page 2. (Read 7056 times)

There are several discussions of decentralized crypto-based capital markets in "project development" section, e.g. this: https://bitcointalksearch.org/topic/decentralized-btc-stock-market-goodbye-glbse-117800

And people question legality of this. So let's discuss legality here.

Suppose there is a way to identify ownership of an security via a chain of digital signatures or something like that. (E.g. "colored coins" are one of such schemes.) People can then trade these securities anonymously.

Let's consider this from issuer's point of view. The most straightforward way is to make a contract which would say that owners who can identified via digital signature scheme have some rights, e.g. issuer owes them money.

So this can be seen as a sort of a digital promissory note, bearer instrument.

However the problem with this is that it might look like issuer creates securities, which is subject to numerous regulations, so it kinda defeats the purpose of decentralized market. (I assume that one of major purposes is to make it simpler to issue securities.)

But what if anonymous shareholders/bondholders would be represented with a non-anonymous entity which will act on their behalf?

Consider this scenario: issuer and a collection agency make a contract, which simply states that issuer owes money to collection agency. But this money can be claimed only if collection agency can provide proof of approval via a certain digital signature scheme.

From legal point of view it is just a contract between two parties, which comes with some weird additional condition, but additional condition doesn't make contract illegal, I think.

From decentralized market's point of view bondholders can use collection agency as a proxy to extract money from issuer: collection agency will either buy their bonds, or will agree to transfer money it extracts from issuer to bondholder if he provides his signature.

There are many possible variations of this scheme. For example, issuer might borrow money from an offshore trust which will hold it for the benefit of beneficiaries which are identified via a digital signature scheme.

Trust can also work for shares: shares will be sold to a trust and trust will represent crypto beneficiaries.

Perhaps to claim money investor will have to identify himself when he provides signatures, e.g. "I'm John Smith, send money here, here's a proof that I'm an owner: xxxx". But still, people can trade on market anonymously. Identification will only be needed if issuer defaults, then people who are not afraid to identify themselves (perhaps they live on Kook islands...) will simply buy bonds/shares from people who want to stay anonymous.

Thoughts?