When NFTs Are Deemed Securities, They Need a Place to Trade
April 14, 2021
by DH Kim, CEO Finhaven
At Finhaven Private Markets, blockchain and digital securities are at the core of our technology and business. That puts us squarely in the conversation about NFTs (non-fungible tokens) — a trend capturing the imagination of investors and media alike.
Blockchain is revolutionizing the way contracts and agreements are created, and the way securities and assets trade hands between buyers and sellers. Digital securities or tokens rely on blockchain to verify their value and authenticity free from the need for paper-based contracts and share certificates.
NFTs are just that: tokens. If minted as a digital asset and offered for whole ownership, there’s no need to worry about securitization of the NFT. People are free to buy, sell and trade those tokens as they please.
But as soon as people look to create and market a NFT for real assets with investment contract elements and/or offer fractional ownership in a NFT, they have created a security. For example, if someone creates a NFT for a piece of art valued at $50 million and sells 50, $1 million shares, then one has created a security — and this requires the issuer to comply with the applicable securities laws and regulations.
And that’s where Finhaven Private Markets comes in. We are a registered exempt market dealer and marketplace with a platform that allows for buying and selling security tokens. We adhere to all regulations and compliance standards set by securities regulators from BC to Quebec in Canada. We are able to work with people looking to sell tokens, providing a simple turnkey solution in our digital marketplace.
When we launched Finhaven Private Markets, we were determined to expand the types of issuers beyond those offered by traditional capital markets. We are pushing into ESG investing (our first issuer, SolarPark, a south Korean solar manufacturer at the centre of that country’s investments in solar and renewable energy, is one example) and other securities to offer our investors a range of choice and opportunities. Some innovative variations of NFTs deemed as securities fit that bill.
The digital asset revolution is here and we’re excited to be at the centre of it.