Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE has filed this Form S-3 which proposes to sell securities using Bitcoin blockchain technology.  The S-3 has not yet been declared effective.

First question: What the heck in blockchain technology?  CFTC Commissioner J. Christopher Giancarlo described it as follows:

“The 20th century underpinnings of the current “closed ledger” financial system are inefficient and unstable. At present, centralized third parties authenticate financial information in generally three-day settlement timeframes that add undue risk, cost and volatility to the marketplace. The 2008 financial crisis revealed that a portion of the recordkeeping infrastructure of the multi-trillion dollar swaps market was recorded on handwritten tickets faxed nightly to the back offices of market counterparties.

Distributed open ledgers have the potential to revolutionize modern financial ecosystems. Unlike current settlement processes, distributed ledgers use open, decentralized, consensus-based authentication protocols. They allow people “who have no particular confidence in each other [to] collaborate without having to go through a neutral central authority.” Distributed ledgers will have enormous implications for financial markets in payments, banking, securities settlement, title recording, cyber security and the process of collateral management that is made infinitely more complex by new regulations. Open ledgers may make possible new “smart” securities and derivatives that can value themselves in real time, automatically calculate and perform margin payments and even terminate themselves in the event of a counterparty default.

Enormous resources are being invested in developing the distributed open ledger known as the blockchain. Over two dozen major global banks have joined together in a consortium to build a framework for using blockchain technology in markets. The London Stock Exchange, CME Group, Euroclear, Societe Generale and UBS have set up the Post Trade Distributed Ledger Working Group to look into how blockchain technology can be used in clearing, settlement and reporting of trades.

The Bank of England has called the blockchain the “first attempt at an ‘internet of finance’” with the potential to de-centralize legal recordkeeping the same way the Internet de-centralized data and information. This transformation will not come without consequences, however, including a greatly disruptive impact on the human capital that supports the recordkeeping of contemporary financial markets. On the other hand, the blockchain will help reduce some of the enormous cost of the increased financial system infrastructure required by new laws and regulations, including Dodd-Frank.”

The “About Digital Securities” section (but don’t forget the risk factors) in the S-3 illuminates how this translates into securities settlement:

“In connection with a digital securities transaction, the tØ software will publish the transaction to the proprietary ledger maintained by the Pro Securities ATS with respect to the relevant series of digital securities. Concurrently, the tØ software will electronically publish the proprietary ledger and commence the process of embedding in the Bitcoin blockchain information necessary to mathematically prove the validity of available copies of the proprietary ledger. Specifically, after a set of transactions in our digital securities have been executed and recorded to the proprietary ledger, the Pro Securities ATS will send a de minimis amount of Bitcoin from an ATS-controlled Bitcoin wallet to another ATS-controlled Bitcoin wallet using the blockchain protocol. This blockchain protocol provides for an editable field that can be used to implant code or other data within the Bitcoin transaction that will be embedded into the blockchain, and the tØ software will use this field to implant anonymized cryptographic hash functions for the digital securities transactions reflected on the proprietary ledger into the Bitcoin transfer made by the ATS. The blockchain will validate this de minimis Bitcoin transaction and embed it, together with the implanted anonymized cryptographic hash function, into the Bitcoin blockchain. As a result, once the Bitcoin transaction is immutably embedded into the Bitcoin blockchain, an immutable record of the digital securities transactions reflected on the proprietary ledger is also recorded within the Bitcoin blockchain. The Bitcoin blockchain participants involved in validating the de minimis Bitcoin transaction do not have any access to the underlying digital securities transaction data. The transaction costs associated with this process relate to the de minimis costs of the Bitcoin currency transaction conducted by the Pro Securities ATS. As a result, the Pro Securities ATS—rather than us or holders of our digital securities—will bear such minimal costs required in connection with embedding cryptographic hash functions into the Bitcoin blockchain.”

You can find more background on this in the Bitcoin Magazine.


Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.