Blockchain Tokenized Equity Transfers With Investor Accreditation
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Existing initial coin offerings (ICOs) for cryptocurrencies lack regulatory compliance and pose risks for investors, with some jurisdictions banning them and the Securities and Exchange Commission (SEC) indicating that tokens may be considered securities, necessitating a secure and compliant platform for offering, purchasing, and reselling tokenized securities.
Innovation Solution
A blockchain platform that integrates investor accreditation, secure document review, and escrow functions to facilitate the offering, purchasing, and reselling of tokenized securities, disintermediating brokers and ensuring compliance with regulatory requirements through real-time verification and immutable record keeping.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of manufacture
If ICOs are conducted without regulatory compliance, then investor protection is reduced and intermediary costs are eliminated, but legal risks increase and jurisdictions may ban them
Solution Approach 1:
The system performs preliminary investor accreditation verification before allowing participation in token sales. The platform pre-verify investor credentials and maintain accreditation status, ensuring regulatory compliance is established before transactions occur, thus preventing legal issues while maintaining ease of conduct
2Loss of energy
If traditional brokers and intermediaries are eliminated, then intermediary costs are reduced, but transaction security and regulatory compliance may be compromised
Solution Approach 1:
The patent introduces a regulated transfer agent as an intermediary that operates on the blockchain platform. This transfer agent verifies investor accreditation, manages token distributions, and ensures regulatory compliance while maintaining the benefits of blockchain efficiency. The transfer agent acts as a trusted mediator that provides security and compliance without the full cost structure of traditional brokers
Solution Approach 2:
The blockchain platform integrates multiple functions including investor accreditation verification, escrow services, token distribution, and regulatory reporting in a single system. This multi-functional approach consolidates the roles previously performed by separate intermediaries, reducing overall intermediary costs while maintaining comprehensive transaction security and compliance
3Reliability
If investor accreditation is strictly verified, then regulatory compliance is improved, but transaction complexity increases
Solution Approach 1:
The system enables investors to self-verify and maintain their own accreditation status by uploading credentials and keeping them updated in the blockchain system. Once verified, the accreditation status is automatically recognized for future transactions, eliminating the need for repeated verification processes and reducing transaction complexity while maintaining strict compliance
4Reliability
If escrow functions are integrated into the blockchain platform, then transaction security is improved, but system complexity increases
Solution Approach 1:
The patent combines escrow functionality directly into the smart contract infrastructure of the blockchain platform. Token distributions and fund transfers are executed through integrated escrow mechanisms that automatically release funds upon verification of accreditation status and compliance conditions. This merging of escrow functions with the core blockchain infrastructure provides enhanced security without requiring separate complex escrow systems
Data Source
AI summary
Systems and methods for offering and purchasing tokenized securities on a blockchain platform meeting current and future federal, state, and offering and holding entity rules and regulations. Tokenized securities purchased during or after the tokenized securities offering are tradable on a secondary market. The server computer of the tokenized securities provides an automated transfer capability for tokenized securities holders.