The news: The US-based private investing platform will use the funding to offer access to digital securities—tokens traded on a blockchain that derive value from real-world assets like company equity or real estate.
Who is Republic: Since it launched in 2016, more than 1 million individual and institutional investors have used Republic to invest in startups, real estate, video games, and crypto projects. Retail investors can start investing with just $10, and the fintech also holds $1 billion in AUM from accredited investors.
The problem with digital securities: It’s still unclear when a digital asset constitutes a security under US law, which can lead to unexpected and costly fines. Last year, the SEC closed a $1.2 billion settlement with Telegram regarding its unregistered digital token offering.
- Republic sees a gap in the US market for a platform that can offer this product while complying with SEC regulations. Its CEO, Kendrick Nguyen, brings his experience to the table, having started his career in securities litigation.
- As a result, major exchanges often avoid dealing with digital security tokens, per Nguyen. For example, many delisted the cryptocurrency XRP last December after the SEC filed a lawsuit against its issuer, Ripple, regarding whether it was a security or a currency.
The opportunity: Republic sees digital securities as a way to increase trading activity on its platform.
- Private investments like company equity or real estate tend to come with high price tags that alienate swaths of buyers.
- Blockchain-based digital securities solve this thanks to tokenization: The expensive real-world asset is divided into digital security tokens that represent a percentage of ownership.
- This opens up the assets to a much larger pool of investors without having to discount their prices—like fractionalized shares on digital brokerage platforms.
- And digital securities investing will boost not only retail investing activity but also institutional activity: EY’s global blockchain head said last month that he expects financial institutions will start tokenizing traditional financial assets in the next few months, suggesting demand from their clients.