Kakao to Document Personal Securities on Its Personal Blockchain
The blockchain arm of South Korean internet giant Kakao, Ground X, is now storing and verifying unlisted investments as non-fungible tokens (NFTs) on its public blockchain.
Unlisted investments are stocks of startups that are offered to investors for purchase prior to a public offering. Since these securities are not listed on formal markets, they are traded over the counter (OTC).
South Korea’s OTC trading market is growing: The country’s OTC exchange K-OTC ended 2020 with a record market cap of over 1 trillion won ($ 1.1 billion) since its launch in 2014. Foreign investors can also buy OTC stocks in South buy and trade korea. In 2018, South Korea changed its tax laws to exempt foreign investors from capital gains taxes on transfers of listed and unlisted stocks.
Ground X has partnered with local stock management and trading platforms like QuotaBook and Angel League, which offer investors the ability to buy stocks of promising unlisted startups or to record and store ownership information.
Information on unlisted shares, including par value, number of shares and shareholder name, is recorded on Klaytn, the blockchain developed by Ground X, according to a press release sent via email.
The record of the stock will then be minted as an NFT and offered to shareholders as a digital card via the Klip digital wallet, which is embedded in South Korea’s popular messaging app KakaoTalk. KakaoTalk serves approximately 50 million users worldwide, and Klip is available to all KakaoTalk users.
Unlisted stocks are usually available to investors through internal connections with the company that offers them. However, they can also be bought through dealers who offer the securities for sale. According to Inés Chun, Angel League, communications manager at Ground X, is open to anyone interested in investing in unlisted companies offered on the platform and managed by experienced investors.
On the contrary, investors cannot buy unlisted stocks on QuotaBook, Chun said.
“Many startups in their pre-IPO phase here in Korea are using QuotaBook, and the shareholders of such startups can stamp their unlisted investment information as NFT cards. Or let’s say you have unlisted interests in a startup and that company now decides to use QuotaBook. Then you can have your NFT too, ”Chun told CoinDesk via email.
In South Korea, people who buy unlisted stocks can send or sell those stocks to others, but not through QuotaBook or Angel League, Chun said. If shareholders want to sell a stock bought on Angel League, they have to do it on the platform, he added.
“For Angel League in particular, you can buy stocks that Angel League only offers. Let’s say you’re interested in some stocks that Angel League doesn’t offer. Then you might have to look for another platform, ”said Chun.
These stocks are highly illiquid as they are not listed on an open market, according to GrowthFunders, a UK-based platform that offers investors the opportunity to get exposure to unlisted companies. This means that they cannot simply be sold until a company goes public. The shares can then be diluted.
In March 2019, Ground X raised $ 90 million through a private coin offering, followed shortly after by the introduction of the Klaytn blockchain in June of the same year. In late 2019, Binance joined Klaytn’s 24-company governance council. MakerDAO also joined the council in November 2020.
The start of the Klip wallet, which was planned for the end of 2019, was delayed. Klip and its token Klay are now operational, supporting the Kakao blockchain ecosystem that all KakaoTalk users can access.