Issue 12 2019

10 Acquisition International - Issue 12 2019 Assurely’s Co-Founder and Chief Insurance Officer, Ty Sagalow shares his views about the role insurance can play to advance digital securities. hy digital securities? Following the great ICO craze of 2017 and its correct ultimate fallout, the securities-technology industry has moved on to another acronym, STO. A term many frequently use to characterize digital securities or Securities Token Offerings. Industry pundits have said that security tokens have the potential to revolutionize capital markets, unlocking greater investor potential. As someone who has been drawn to new markets, revolutionary technology, and innovative industries, I can’t help but to recall many parallels and say, “we’ve seen this story before.” The innovation around security tokens and the prospect of its impact is momentous. It is a fundamental change in how the economy will function; it’s similar to the internet when we built some of the original risk products for that life-changing innovation. If this is true and what the pundits say is correct, we need to understand the nuances of this how technology and financial sector innovation impacts risk. How did the industry get to his point? Traditional finance, among other industries, was built on paper. As a young insurance underwriter on Wall Street looking at companies’ financials, I would see stockholders receiving paper certificates as the record of ownership. Eventually, brokerage firms would hold your shares “in street name” indicating the actual owner’s ownership in “book-entry” form, meaning on a computer hard drive somewhere. In 2017, the General Corporation Law of Delaware, the home of more than 50% of all publicly traded companies, was amended to provide statutory authority for Delaware corporations to use blockchain, a type of distributed ledger technology or “DLT,” to create and maintain corporate records, including the corporation’s securities register. Today, with even more advanced technology available, these same type of ownership shares can be represented by tokens and stored digitally on a blockchain or distributed ledger technology. To validate the technology’s use case, the U.S. SEC released a joint staff statement in 2019, which should help pave the way for more traditional investors to hold digital asset securities. Basically, the technology supporting securitized assets has been updated to reflect today’s highly digitized world. It’s a clear “use case” for this powerful technology - digital securities. This is a very logical step given the evolution of capital markets from trading floors to computers to phones. What is hindering adoption? Often the word “new” can trigger uneasiness and fear, especially when it comes to making investments. As an insurance industry veteran, one develops a keen eye for spotting new risks and how to mitigate these risks while helping “new” markets flourish by Building Trust in Digital Securities: Insurance’s Time To Step Up W “I can’t help but to recall many parallels and say, we’ve seen this story before. The innovation around security tokens and the prospect of its impact is momentous.” Jan19097