blocktrade.com Tokens (BTT) are in the process of becoming eligible for the swap into our premium participating shares which will be offered via Public Offering in accordance with applicable regulations in the first quarter of 2020 (as currently estimated).
As we have always put the community first, we will be (also) enabling opportunity to swap BTTs into equity instruments (by distributing them to eligible beneficiaries) at a higher price – the average price of BTT in 2019 was 0.0215€ while we will be valuing BTT at approximately 0.039€ per BTT for the purpose of implementation of the swap.
Before Cryptix acquired Blocktrade, the future of BTT’s was uncertain as the risk of a wind-down was significant. Additionally, BTT’s were issued by another entity which is now not related to Blocktrade anymore. Still, nevertheless, Cryptix and Blocktrade leadership agreed to keep the community involved by swapping BTTs into the participating shares (or ETH for US citizens which are not eligible for the swap into participating shares).
We plan to keep the community close to the future development of the Blocktrade ecosystem, and we believe that the possibility to become a shareholder is the best way to make the community an even more critical pillar of our success with aligned incentives and goals. Since we are on the mission to disrupt European and global capital markets, we want to see the industry evolve and move from utility tokens to financial instruments, and that our community also benefits from our success with a much-improved financial instrument compared to utility token (BTT).
Official details about the Participation certificates, offered via public offering will be described in the Prospectus, which will also be filed with the regulators for their approval.
Some information about our plans can already be shared. We are planning to issue “premium participating shares” ( also known as participation certificates) which will grant owners the equal right to dividend (and liquidation) distributions as a traditional shareholder without the voting rights. These participation certificates (so-called “Partizipationscheine” – a form of financial instrument under Liechtenstein’s Personen und Gesellschaftsrecht (PGR)) are often used in Switzerland and Liechtenstein for raising capital from the public or non-strategic investors. The benefits for investors are equal (or even preferential) treatment in relation to common shareholders, concerning profit distributions and in the case of liquidation.
Comparing utility tokens with financial instruments is almost impossible, but the table below outlines the significant differences.
|Utility token (BTT)||Security token (participating share)|
|What is it?||A voucher that can be used on blocktrade.com for paying membership fees||A financial instrument that pays out a proportional share of the profits|
|What are the benefits to holders of it?||Discounts on the membership fee||Owning a piece of the business through participating shares, having an equal right to proportional profit distribution as a traditional shareholder, clear legal protection|
|What is the legal definition of it?||A voucher||Participation certificate (Partizipationschein)|
|Are there any legal protections for the holders?||Contractual relationship, some parts of the consumer protection laws may apply||Corporate and capital markets laws apply|
|Is there any profit sharing?||No||Yes, through dividend payouts|
|Is there any buyback in place?||No||Yes, a buyback is possible after shareholder approval|
|Are tokens burned?||Yes, after they are used||Yes, but when buying back securities on the secondary market, the issuer cancels them and effectively takes them out of circulation. The effect is similar to burning, but it is called cancellation of securities|
|What are the risks?||Limited legal rights, illiquidity, loss of all rights in case of project shutdown, severe volatility in the price, loss of access to private keys, cybersecurity risks related to blockchain||All risks associated with owning shares in the company (company-specific risks, market risk, etc.). Full risk disclosures and description will be available in the Prospectus|
|What is the upside?||Lower membership fees, a potential increase in price due to increasing demand from cryptocurrency traders||Share of the profits generated by the company, possible increase of the valuation due to growth of the company, potential acquisitions, clear legal rights|
We believe that participating in the company’s success with owning part of the profits through securities offers significantly more alignment between shareholders and the management of the company. While utility tokens might be useful in creating a network value of the ecosystem in some cases, the incentives of holders are often not aligned with the goals of the creating value in the ecosystem itself.
In the following weeks, a BTT Foundation will be formed which will hold the company’s participating shares and will distribute it to eligible beneficiaries, namely eligible BTT holders. It means that you will have to disclose your personal information for verification purposes (KYC) and prove the ownership of BTTs.
To be able to participate in the swap, you will need to have a verified account open at blocktrade.com and BTTs deposited on the account. Eligible holders of BTTs who cannot open an account because their jurisdiction is not allowed (like Japan), can still participate in the swap by doing the KYC process on a separate website which will be created only for this purpose. We are working on the ways how to accept as many jurisdictions for the swap. There might be some limitations in certain countries regarding ownership of securities of the company in a different country, especially related to taxes and reporting. Shareholders will have to report any ownership, gains or dividends to the relevant tax authority.
Due to differences in regulatory frameworks, we will not be able to accept US citizens in the swap and countries that are on the FATF grey- and black-list are also not eligible for the swap. US citizens will very likely have an option to swap BTTs for ETH at a price, as mentioned above (0.039 EUR per BTT). We are working on the concept and the legal structure to make this procedure possible.
To eliminate any potential conflicts of interest or potential misuse of insider information, Blocktrade’s shareholders and employees are not allowed to participate in the swap.
After the grace period elapses in 2020, BTT’s will not be transferrable (nor tradeable, as BTT smart contract will be frozen) anymore. Still, they will be able to be used to purchase a membership on blocktrade.com, meaning that the primary function (voucher) will stay intact.