The evolution of traditional capital markets through blockchain

Abstract

The emergence of virtual currencies has filled a vacuum on the internet. Imperfect as they may be, virtual currencies such as bitcoin appear to provide an efficient means value in the internet and unitizing it to facilitate transactions in cyberspace. Virtual currencies can be used not only to facilitate the transfer of virtual assets or the delivery of virtual services but also in electronic transactions involving physical goods and services. This paper aims at analysing the novel ways for companies to reach their financial goals. Online-mediated offerings have posed to be the long sought for innovative and efficient shift from the traditional modes of raising finance. This paper aims at addressing the advent of distributed ledger technologies and blockchain (a decentralised system with shared memory) dismantling the borders between the ‘virtual’ and the ‘real’ world, mobilising and channeling capital in Europe. Distributed ledger technology can be somewhat seen as democratizing finance. The blockchain platform and the tokenisation of initial public offerings into crypto-assets coined the ‘everyman’s initial coin offering,’ the Security token offering, giving investors several permutations of rights. This paper shall strive to highlight that in this area, as in other areas of web-based financial activity, the shift presented might be too overwhelming to be regulated within the borders of any single country due to its ability to be cloned and mirrored in any place and accessed from anywhere by any technological means. Although these developments are presenting challenges to operators, regulators and academics alike, the Maltese legislator has taken pro-active steps in implementing a comprehensive regulatory framework which strives at regulating issuers, their internal organizational structure, the architectures employed as well as aiming at a degree of investor protection that is unparalleled within the sector.