Draft Summary – Subject to Changes
One feature that enables the exchange of regulated securities is the instant transfer of buyer’s verified KYC/AML data to a token issuer upon purchase of their token, pending agreement to issuer’s T&C. When users register accounts at BTOKX, a 3rd party KYC/AML verifying agency must approve them, possibly verifying ‘accredited investor’ status in the process. The KYC/AML agency then enters approved user data & documents into the BTOKX database, possibly using a blockchain for storing encrypted user data, easily shared with token issuers upon user consent.
The initial trading platform may be built on industry standard technology. BTOKX may simply form a front-end interface over the existing Numeum ecosystem running on BitShares. We plan to develop a decentralized exchange running on the BitShares or EOS blockchains. Choosing the best technology to build a decentralized exchange on largely comes down to regulatory acceptance. The main advantage to a decentralized design is that account custody remains in the hands of the user, so any asset issued natively (not by gateway) on the blockchain is immune to counterparty risk normally posed by centralized exchange operators holding customer funds. There are many other advantages to decentralized exchanges that should satisfy both regulators and traders.
Highly liquid cryptocurrencies (BTC, ETH, LTC, etc.) will be among the markets offered. Though this is not the primary focus of the exchange, we anticipate high volumes in these markets.
Margin trading functionality for some BTOKX accounts is planned. As a peer-to-peer margin lending system, we plan to offer account holders an option to earn interest by lending their assets to traders.
Similar in ways to margin trading, securities-backed lending is nothing new, several banks and brokerages offer such secured loans. When BTOKX can support it, some users may have an option to actively trade their account whilst leveraging it for extra spending money. This may involve a peer-to-peer lending mechanism for sourcing capital.
There are many other features we have planned for this platform, including algorithmic trading.