Chinese exchange giant Huobi has announced an investment in and partnership with the OpenFinancial Network. The OpenFinancial Network describes itself as “the first US based regulated security token trading platform.”
A security token, as opposed to a utility token, is designed to represent value of an outside source. Most commonly, it is supposed to represent ownership of a company or project, much like stocks represent ownership in companies in traditional finance.
In the United States, security tokens are generally seen as under the purview of the Security Exchange Commission (SEC). Since the SEC has strict laws on who can offer and invest in securities, that has put the US market out of reach for a lot of security ICOs. OpenFinancial Network is attempting to bridge that gap by using its contacts and experience in the industry. But more than just adding compliance to the bevvy of shady crypto ICOs, they also hope to tokenize traditional securities and enable their trade using the OpenFinancial Network blockchain.
Huobi has been making inroads in the US market, launching its US based exchange HBUS earlier this year. The investment with OpenFinancial Network seems to be a move towards expanding that reach and preparing for whatever comes next.
“Huobi Eco has always been committed to providing support and solutions for Huobi to operate within the compliant requirements of every country in which we do business.” Explained Huobi’s Head of Business Development and Investment for North America, Will Wang, in a press release “This is even more important as our market matures. We are looking forward to collaborating with OpenFinance and applying blockchain technology to revolutionize the financial technology market.”
While the idea of trading securities on the blockchain has been around for years, it hasn’t come to fruition yet. While you can buy tokens for hundreds of crypto-based projects, you can’t buy Apple or Tesla stock on the blockchain yet. However, there are huge inefficiencies in the way stock purchasing is done now. OpenFinance estimates that $80 billion are wasted every year due to those inefficiencies.
Blockchain technology has the potential to greatly reduce that wasted fortune. But for that to be successful there needs to be a solution that is (1) secure (2) easy to use and (3) compliant with regulators. Apple isn’t going to put its stock on an insecure, difficult to use and possibly illegal exchange, that much is obvious.
OpenFinancial Network wants to provide a platform that they could get on board. If Apple or companies like it will ever make that jump regardless remains to be seen, but the tools need to exist for there to even be a possibility.
OpenFinancial Network believes the traditional financial players will get on board eventually and apparently, so does Huobi.
“We believe that security tokens are the future of finance, and that Huobi’s investment in our trading platform is reflective of the rising interest around the globe in this emerging financial ecosystem”, said Juan M. Hernandez, CEO of OpenFinance Network in a press release.
The amount invested has not been disclosed at press times, but it did note that it was a part of Huobi’s larger strategy to make inroads in the United States.
While the bears are out, there are plenty of things in Crypto to keep our minds off of it. Huobi not shying away from throwing around some cash to increase their place in the market is certainly a good sign.