10XTS CEO, Michael Hiles, and CPROP CEO, Adam Koehler, were invited by the U.S. Chamber of Commerce to discuss public policy challenges for early stage capital and blockchain in Washington D.C.. The meeting was set by the Chamber’s C_TEC group, and included senior directorship of the U.S. Chamber focused on emerging technologies like blockchain and fintech.
Hiles and Koehler addressed the intrinsic issues affecting capital formation for startup tech companies across the United States, but particularly those in the “fly over” midwest. Access to capital is becoming a national issue, affecting the nation’s competitiveness in innovation around the globe. The hurdles to accessing capital have become so high with regard to securities laws, and the pool of early stage investors to fund private sector innovation represents a very small opportunity to obtain capital funding.
ICOs, or initial coin offerings, demonstrated the demand for higher yield investment opportunities in startup companies. It also established the technical framework to mobilize capital on a global basis. While there have certainly been high rates of bad actors in the mostly unregulated space, it represents how the technology has rushed past the regulatory environment, and highlighted the antiquated nature of nearly century old securities laws that do not contemplate the disruptive nature of emerging technology.
Koehler’s company, CPROP, is working to disrupt the real estate transaction space by digitizing closing documents. He is the co-founder of Dotloop, which sold to Zillow for over $100m cash. The Dotloop platform has transacted over $4 trillion in real estate deals. Due to the restrictive and uncertain regulatory environment in the United States, the CPROP team chose to move their token sale offshore – and ultimately reject U.S. investors. This prohibits the U.S. from experiencing the growth in return on capital investment.
10XTS is working to create a fintech ecosystem for the regulatory-compliant issuing and trading of tokenized assets. Targeting early stage capital, the 10XTS team has worked to launch a platform that reduces the risk of long term investment by improving the liquidity of early stage assets. This is challenging because the platform uses internal application tokens to activate features that create, trade, and report on tokens that represent securities. This distinction shows the differences between tokens with security attributes, and tokens that are simply internal payment and authorization mechanisms to perform useful tasks within the network.
By opening this dialogue with one of the most powerful private sector lobbying groups, the goal is to force the creation and adoption of sensible regulation with clear definitions for projects that launch and sell tokens that are not representative of securities in the traditional sense. While the Securities and Exchange Commission has adopted the view that all token sales are securities, with the tokens being “investment contracts”, the issue is still cloudy with many use cases demonstrating this isn’t always the case.
The 10XTS and CPROP teams are both based in Cincinnati, Ohio, and work to promote the region and startups. We’re excited to continue the dialogue with the U.S. Chamber team, who has offered significant assistance moving forward.