CDRX to replace traditional shares with cryptocurrency depository receipts
Cryptocurrency is no longer an idea without a purpose. It has many purposes already. Yes, that's rights. One of those applications is in the area of equity ownership (ownership of shares and stocks). CDRX will next year launch cryptocurrency depository receipts (CDRs) that can be used in the place of traditional shares and share registers, all without the high brokerage fees and liquidity costs, slow transaction settlement times such as delays informal exchange and registration of ownership, and high administrative costs for companies and larger professional investors. They will also launch an exchange where the CDRs can be traded on a peer-to-peer basis.
In other words, CDRs will be used to convert equities and bonds into securitized tokens that can be issued and traded on blockchain such that investors can trade them cheaply, faster and in multiple fractions. Thus, it is a platform for tokenizing ( converting into tokens) of assets in this case equity stock, shares, and bonds. The company will then afterward phase out traditional stock and share issuance to use only the CDRs.
CDRs will also deal with other problems such as limitations in voting participation and privacy concerns for transactions. The platform will facilitate the trading of $600tn global securities market: equities; bonds; and derivatives as easy as trading cryptocurrencies.
The company is calling Cryptocurrency Depository Receipts (CDRs) as the " natural evolution of traditional equity ownership" and they are basically securitized or legal tokens issued on a blockchain with each receipt backed on a one-to-one ration by stocks or shares. They can be used to represent a fraction of a share, a single share or multiple shares. The stocks are held by a custodian or a depository bank or specialized trust. The custodian issues tokens against the held shares. They differ from cryptoshares in that while cryptoshares are issued directly in an electronic format, CDRs are issued against equity issuance held in custody.
The company will have CDRs for all major cryptocurrencies and the platform will be able to support institutional trading. The platform will also be able to list new and existing equity issuers on a continuing basis. The platform will have own token to be used in dividend payment, coupon payments, votin, gand other corporate actions. Holders will also get other benefits such as discounts on the cryptocurrency exchange, pre-release access to new listings and issuance, and re-use of market data and indices at no cost.
The project is led by former Global Head of eCommerce Support at Standard Chartered Mohammed Hakeem, who will be Head of eCommerce, and other crypto and banking experts. Their private sale was successful and closed within a very short period of starting while their ICO starts Monday, November 19 after the pre-sale which started 5-Nov-18.
To launch an exchange
The CDRs, like cryptoshares, will facilitate fractional ownership of shares and trading of shares between parties on a peer-to-peer basis or to other parties such as companies. The exchange will also have common features such as market orders, limit, stop, day orders, etc to be managed using an algorithm tool-kit. CDRs can be traded for any crypto and fiat.
The exchange will facilitate a 24/7 trading on a high-speed order matching engine. It will have global liquidity sourcing and feature low trading costs. It will also feature auction service and APIs to facilitate connecting and trading of institutional/professional clients.
The CDRs will utilize smart contracts to facilitate the issuance of dividend tokens and the CDRs and tokens will be trade-able on an exchange. In that regard, CDRx will launch an exchange to facilitate the trading of CDRs. The exchange is to be launched by end of this year but they are set to start with a non-securitised token-to-token trading platform which will be expanded to include securitized tokens and token-to-fiat currencies. The smart contract also facilitates voting. The company will ensure that the CDRs are issued in line with regulations, for purposes of protecting customers.
Traditional equity ownership has many flaws
Equity or stock/share ownership, currently a market worth $77.7 trillion, is not without its share of problems. If you are into equity ownership, your owner's name, number/class of shares held and contact details are held in a share register, which is a legal record that determines voting rights, dividend amount, and used to notify shareholders of corporate actions for instance share splits, new issuance, dividends.
A major problem for traditional equity ownership is that it favors middle-men/brokers. For retail investors, there are high transaction costs where a transaction costs more than the US$25 while it costs professional investors or asset managers around 0.15% or more. There is also slow settlement periods, which is around 2 days, in addition to the paperwork associated with opening and maintaining a brokerage account as well as initiating, executing and settling a transaction. Professional investors/asset managers also pay dearly for maintaining large back-office / administrative operations and this is passed downstream.
Besides, large transactions can become visible to the market before they are fully executed. For equity issuers, there are also large administration costs to bear. These costs are associated with corporate actions such as shares splits, dividends, new issuance etc through notices and filings. The voting process also turns out as very costly and one that hampers shareholder participation.