Next Generation Securities Smart Contract
Solidity allows embedding any creative logic into smart contracts. Nevertheless, most Ethereum tokens are based on the same logic, which developers copy-paste without any alterations.
This approach may work for utility tokens, but for regulated financial instruments, requirements are much stricter. Here are important features smart contract for securities should possess to be compliant with corporate law and securities regulation:
1. Wallet Whitelisting. A utility token can be sent to any compatible address, which is not the case for securities. The issuer has to whitelist the investor’s address after the appropriate KYC check. Failure to track ownership of your securities is a severe violation of securities laws in almost every country. To help issuers meet legal standards, our smart contract includes a “Whitelist” function that allows us to add/remove addresses from a list of those who have permission to own their securities.
2. Shares are non-divisible. Although it’s possible to implement divisible share certificates, it will create additional legal challenges and complicate reporting. We issue securities in a non-divisible form with 0 decimals after the point.
3. Remote Lock-up. Depending on the offering regulation, there may be limitations on the circulation of securities. To comply, an issuer must be able to lock securities on any wallet. This function may also be used for vesting or resolving a legal uncertainty, such as when after an offering KYC issues appeared. Most securities protocols support only the total lock-up of all tokens. We strive for greater flexibility and provide an option to lock only the selected wallets.
4. Remote Burn. Many clients expressed concerns about risks of investors losing private keys or tokens ending up in “shady” hands. As an answer to them, we introduced functionality that allows burning any amount of securities on any wallet that supports the ERC-20 standard. After the burn tokens can be restored on a corporate ledger and sent to rightful owners. This operation should be accompanied by offline legal procedures, such as board decision or court resolution; therefore, an issuer cannot abuse Remote Burn to burn securities of legally compliant investors.
The features above are included in Stobox Network Protocol v.0.7. It will be used to issue Stobox shares STBX in the form of tokens, which will be open to purchase on STO. And this is only a beginning. We will add more features automating compliance and operations with securities to empower businesses to strive in a digital world. The public implementation of Stobox Network Protocol is planned in Q1 2021.
