Overstock's TØ to issue first-ever blockchain security for $500 million

Securities broker-dealer, Keystone Investments, has selected TØ’s blockchain trading technology to provide brokerage services to market participants seeking to trade blockchain securities.

This is part of Keystone’s brokerage service’s support for Overstock’s blockchain preferred stock offering, TØ’s parent company’s ongoing effort to reconcile fiat currencies with the bitcoin blockchain.

Overstock has become the first company to solicit qualified institutional buyers for digital corporate bonds that will be traded using the same technology as cryptocurrencies such as bitcoin.

Overstock CEO Patrick M. Byrne said TØ has been working on a version of Wall Street’s blockchain and that Overstock will be able to issue a security on the technology they are creating.

Under the new arrangement, TØ technology will allow investors to create digital trading accounts through Keystone beginning with Overstock’s offering subscription period, which will be announced shortly.

The U.S. Securities and Exchange Commission (SEC) has declared Overstock’s S-3 filing effective in December 2015, which means Overstock is able to publicly issue blockchain shares. In the SEC filing, the company said it plans to offer up to $500 million in common stock, preferred stock, depositary shares, and debt using distributed ledger technology.

While TØ has pioneered efforts to bring greater efficiency and transparency to capital markets by integrating distributed ledger technology, using the technology to issue shares could pose a challenge to banks and securities firms that earn fees from processing equity products.

It’s unclear whether Overstock’s plan will work, as there may not be enough supply and demand to form a market, as blockchain stocks don’t trade on the public market. But if it works, it could set a blueprint for how companies can IPO or sell shares on a secondary basis.