After discussing the definition of security tokens and the concept of deposit, Lars Schlichting, CEO of Poseidon Group and Partner of the law firm Kellerhals-Carrard in Lugano, now talks about trading platforms and in particular the ability to offer security tokens to the public, anticipating big news concerning Eidoo.
Lars, despite Switzerland being known as a crypto nation, the main cryptocurrency trading platforms are not located in Switzerland, why?
Centralised cryptocurrency exchanges offer their users the possibility to deposit fiat currencies, which are used to execute transactions. However, the deposit of currencies is an activity reserved for banks. For this reason, Swiss exchanges mainly carry out OTC transactions or offer purchases with immediate transfer of tokens to a wallet. Obviously this way of operating is not competitive with foreign exchanges, who can accept deposits from the public. In most cases though, these foreign exchanges lack any guarantee in the case the trading platform fails. From January 1st, 2019, however, it will be possible to obtain the FinTech licence in Switzerland, which will make it possible to accept deposits from the public of up to 100 million CHF. In addition, there are currently several projects involving the use of alternative solutions, such as a deposit of fiat currencies with an authorised institution connected to the exchange via API. This means that also Switzerland has now the conditions to have large cryptocurrency exchanges.
What about security tokens? Will it be convenient to create platforms for the exchange of security tokens in Switzerland?
In its report, the Federal Council made two statements that I consider to be very important. The first is that it has recognised the importance of blockchain technology for securities trading and has announced legislative changes to encourage the creation of financial market infrastructures (i.e. exchanges, multilateral trading facilities and organised trading facilities) within the banks themselves. In the medium term, this will lead to the creation of different platforms that can also offer trading of security tokens. The second is the acknowledgement that peer-to-peer platforms do not have to apply for any authorisation to trade security tokens. If we link this statement with decentralised platforms, which, as we have seen in the previous interview, do not even have to apply for authorisation like banks, we can immediately create platforms for issuing and trading security tokens, provided that they operate on a peer-to-peer basis.
So will it soon be possible to buy security tokens ion decentralised exchanges? As CEO of Poseidon, can you anticipate how Eidoo will behave?
Actually Eidoo, through its decentralised exchange (currently available for desktop or in beta version for Android, whose official launch will take place in the next few days) already has the technology necessary to offer its users security token trading. We’re taking a few days to decide what to do but if we don’t find any negative legal aspects I’m convinced that we can quickly offer the issuance of security tokens on the primary market and the trade of these tokens in a peer-to-peer way.
What would be the difference with a traditional stock exchange or a Multilateral trading facility?
First of all, I would like to point out that only authorised entities may participate in a stock exchange or a Multilateral trading facility. Unauthorised entities, including individuals, may only participate in an organised trading facility or peer-to-peer platform. Furthermore, peer-to-peer platforms do have all the functions provided by authorised platforms. In practice, they cannot provide an order book or allow the execution of orders that are not on the market. From this point of view, these platforms have limited functionalities, but precisely for this reason they can offer a completely decentralised service and without intermediaries.
This system will work until there is a new specific authorisation, which the Federal Council has announced it will create, allowing unauthorised entities to participate in Multilateral trading facilities and thus to take advantage of more features for the execution of transactions.