Wednesday, February 5, 2020

ConsenSys Acquires SEC-Regulated Broker-Dealer in Bid to Bring Blockchain to Local Debt Markets

Leading Ethereum development studio ConsenSys has made its first acquisition this year through its internal securities arm the ConsenSys Digital Securities.

The acquisition for the US Securities and exchange Commission-regulated broker-dealer Heritage Financial Systems was announced by the company on Tuesday, February 4th in a blog post.

The Brooklyn-based blockchain firm intends to leverage the expertise and legal foothold of the HFS to introduce blockchain-based solutions to the highly unappreciated local debt market the integration between the two firms will hopefully make municipal bonds more accessible to citizens in an industry that has shunned retail investors for institutions such as mutual funds and banks.

Clearly, ConsenSys thinks that the local debt market is ripe for disruption. The company projects that the municipal debt market is worth at least $3.8 trillion and nets investors in excess of $400 billion every year. The problem with the industry which was launched back in the late 1800s’ is that over time the market has been left behind in terms of technology making processes slow and expensive.

SECguide tokens

This resulted in less appealing returns for retail investors while making it more appealing to large investors. However, the local market should be an investment tool for local citizens who currently are unable to access municipal bonds.

The use of blockchain in such a traditional industry is poised to improve service delivery and help promote the investment opportunities of buying local bonds. ConsenSys will help local governments to tokenize their bonds on the CodeFi platform and float the bonds on the newly acquired HFS platform.

“It’s a great use case of the technology,” Emma Channing, an executive for the ConsenSys Digital Securities LLC who will spearhead the integration between the HFS and CDS systems told on Tuesday. “There’s a strong desire and demand for more local engagement and more democratization of these types of muni offerings.”

Joseph Lubin, the founder and CEO of ConsenSys said in a statement that,

“Tokenized, digital municipal bonds can help restore the muni market to its original community-driven spirit by making the securities more accessible to everyday citizen investors and more cost-effective for communities of all sizes […] Customizable digital agreements, or smart contracts, will help streamline and automate processes such as muni bond payment and settlement, legal arbitration and investor ID verification.”

ConsenSys was launched back in 2014 with the aim of creating an ecosystem of apps that leverage the Ethereum blockchain. The company has grown in terms of products and workforce over the years and expanded globally. On Tuesday, the company announced that it would downsize its workforce by 14% and split into two distinct divisions one focused on product development and the other focused on investments.

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