ConsenSys Acquires SEC-Registered Broker-Dealer to Tokenize Bonds

Published at: Feb. 4, 2020

ConsenSys, a major blockchain firm founded by Ethereum co-founder Joseph Lubin, has acquired an American broker-dealer, Heritage Financial Systems.

Heritage, a broker-dealer registered with the United States Securities and Exchange Commission (SEC), has been acquired by ConsenSys’s own broker-dealer, ConsenSys Digital Securities. ConsenSys’ blockchain-powered commerce and finance arm ConsenSys Codefi announced the news on Feb. 4.

Heritage acquisition to bolster ConsenSys advisory and broker-dealer capabilities

By purchasing Heritage, ConsenSys intends to reinforce its advisory and broker-dealer capabilities that will help the firm to implement blockchain technology for issuing tokenized bonds offerings in the municipal market.

Emma Channing, a representative of ConsenSys Digital Securities who will coordinate the brokerage effort through Heritage, said in an email to Cointelegraph:

“The acquisition will bolster ConsenSys in-house broker dealer capabilities by adding municipal finance in addition to some other lines to our existing line of private placement business at Consensys Digital Securities.”

Specifically, ConsenSys is planning to apply blockchain technology to deploy automatic bond payments via smart contracts as well as to allow issuers to track who owns the debt. Additionally, ConsenSys wants to develop tokenized mini-muni bonds via its Codefi platform in order to provide issuers with the opportunity to sell securities in smaller denominations.

ConsenSys has been actively pushing its STO expertise

Founded in 2018 in Brooklyn, New York, ConsenSys Digital Securities is a ConsenSys’ broker-dealer arm that develops services for issuers who are willing to launch security token offerings (STO), or tokens that are backed by real-world assets such as stocks or bonds.

In March 2019, ConsenSys Digital Securities partnered with major U.S. STO-focused firm Satis Group, a company registered with the U.S. Financial Industry Regulatory Authority. According to ConsenSys, the combined teams had over $100 million in issuance experience, while the partnership underscored ConsenSys’ commitment to realizing the potential of tokenized financial assets.

As reported by Cointelegraph, security token offerings have been increasingly popular recently, starting to provide some competition to the initial public offering, which is the process by which a private company can go public by selling its stocks to the general public.

Other companies in the crypto industry have been actively embracing the STO market so far, with Overstock’s blockchain arm tZERO recently announcing its plans to launch its own crypto and digital asset broker-dealer service in the first half of 2020. Previously, tZERO’s Boston Security Token Exchange filed an application with the SEC to approve the launch of a market for publicly traded registered security tokens.

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