Ep. 751 Bringing Equity Markets On Chain with Regulatory Compliance

Joris Delanou discusses the transformative potential of tokenization in equity markets, emphasizing its role in capital formation and liquidity enhancement for early investors. He asserts that as more participants enter the ecosystem, tokenization is evolving into a commodity, fundamentally changing how equity is perceived and managed.

Delanou, representing Fairment, a registered transfer agent with the SEC, believes that the lines between public and private equity are blurring due to tokenization. He argues that while compliance and disclosure remain critical, the access to capital and liquidity provided by tokenization will diminish the traditional distinctions between these two types of equity.

The conversation highlights a significant global demand for fractional ownership in U.S. entities, particularly as many successful companies remain private, limiting investment opportunities. Delanou addresses the challenges companies face in safeguarding their cap tables from unauthorized transfers and ensuring valuation integrity, especially concerning employee stock options.

Delanou suggests that tokenization could streamline the initial public offering (IPO) process by mitigating risks associated with compliance and intermediation costs. He anticipates that the transition towards tokenization and cryptocurrency will unfold over the next five to ten years, with both private and public issuers seeking enhanced transfer agency solutions to meet modern expectations.

Fairment aims to create an interoperable framework for managing securities within the equity capital market. However, Delanou acknowledges the difficulties large banks face in moving from traditional systems to blockchain technology. He predicts that the future of tokenization and cryptocurrency will attract renewed interest and could lead to significant valuations in the coming years.