One of Wall Street’s largest and most recognized banks just gave a major tip of the cap to the digital asset industry…
Morgan Stanley has officially made its first investment in blockchain.
The behemoth bank recently co-led a Series B fundraising round for blockchain platform Securitize that raked in some $48 million from investors.
This is a huge deal for the industry…
Morgan Stanley chose to partner with Securitize because of its leading position not just in digital securities… but also in regulatory compliance and asset securitization.
Securitize helps businesses create digital securities and raise capital in a compliant way. It handles security regulations such as “know your customer” (KYC) and anti-money laundering (AML) laws. Its goal is to create a legitimate and trusted trading platform for digital securities—similar to a brokerage account for stocks.
(If you’ve been following Curzio Research over the last couple of years you’ve heard about Securitize. Frank selected Securitize to help raise capital and create the Curzio Equity Owners [CEO] security token.)
Pedro Teixeira, co-head of Morgan Stanley’s Tactical Value Investing branch, will join Securitize’s board of directors. Teixeira summed up Morgan Stanley’s investment this way:
“We make long-term investments in businesses and asset classes that are ahead of the curve … Our investment in Securitize is a sign that we believe in the growth and adoption of digital asset securities.”
A quick refresher on digital assets and the blockchain
The blockchain is simply a record of data. Think of a giant receipt. While it’s best-known for recording crypto transactions… businesses use blockchain technology to track all kinds of things, from product supply chains to financial data.
A digital security token is a security that represents an equity stake in an underlying company or asset. Since these tokens are backed by a secured asset, they’re subject to federal securities regulations—like stocks… And like stocks, you can earn dividends.
These are different from cryptocurrencies because most cryptos don’t give investors an equity stake in the business. Most cryptos are “utility” coins—meaning they can only be used for specific purposes on the company’s own platform. Think of game tickets from Dave & Buster’s—you can only spend them at D&B’s gift shop. Otherwise, they hold no real-world value.
Creating a security token is a much cheaper and more efficient way to raise capital vs. the typical Wall Street initial public offering (IPO). And unlike cryptocurrency, it gives investors direct exposure to the business.
An important deal for the digital asset industry
More regulations are coming from the Securities & Exchange Commission (SEC) for the digital securities space… and that’s a good thing. For this industry to scale, investors need to trust the trading platforms.
Securitize has already helped over 150 companies raise money and has more than 300,000 investors registered to trade on its platform. CEO Carlos Domingo says the company is expecting regulatory approval for its trading platform and app in the coming months.
And Securitize couldn’t ask for a better investor than Morgan Stanley…
Of note, Morgan Stanley purchased discount broker E*TRADE last year… As Securitize rolls out its trading platform and app, it’s not hard to imagine a future where you can trade stocks and digital securities on the same platform.
We’re still in the early innings of digital assets… But individual investors need to pay close attention as we move towards more regulation.
P.S. The security token market is quietly revolutionizing the entire financial industry… And once it goes fully mainstream, the biggest gains will have already gone to the early movers.