How are Digital Shares different from Bitcoin?
Unregulated cryptocurrencies like Bitcoin and Ethereum use blockchain technology to facilitate payments and transactions, and they generally are not treated as securities by the Securities and Exchange Commission (SEC). On the other hand, digital shares offered by sponsors on the Security Token marketplace are regulated securities and therefore come with investor protections, even though the tokens themselves are held on a blockchain ledger. Whereas Bitcoin and Ethereum are pseudo-anonymous and can be held by anyone, digital securities are only permitted to be held and transferred to parties who have undergone the necessary due diligence to ensure their eligibility.
Unregulated cryptocurrencies like Bitcoin trade on crypto exchanges that are not authorized by the SEC or Financial Industry Regulatory Authority (FINRA). Tokenized digital shares and the ATSs that trade them are subject to securities laws, including regulation, oversight, and approval of the SEC, FINRA, and other state and federal agencies, anti-money laundering rules, and other laws, just as they do with shares that have not been tokenized. Likewise, companies who issue the tokens rely on transfer agents to appropriately document the identities of shareholders. Ironically, the same technology that enables pseudo-anonymity for cryptocurrency is especially useful for providing transparency of ownership and secure transactions for digitized shares.